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Important Changes To Holiday Pay - July 2022

Changes to Term Time and Irregular Working Hours - Holiday Pay 

July has seen a very important employment law update to come out of a significant tribunal case that has gone all the way to the Supreme Court and will have an impact on employers across the country who employ zero-hour employees or those who are contracted for a full year regardless of the number of hours they work, such as term time.

Employees on permanent contracts with ‘fixed hours’ such as full time and part time contract will not be affected by this case; it is only those that work more of a casual contract that will be impacted.

This case related to holiday and holiday pay for casual employees. For avoidance of doubt, where statutory holiday is applied for employees, those working full time are entitled to 5.6 weeks holiday or 28 days inclusive of the 8 bank holidays. Employees on a part time contracted basis are entitled to 5.6 weeks pro rata to the amount of time they work. Below is a summary table in days for those working part time. Your consultant can assist you with a calculation if your holiday is calculated in hours rather than days.

Holiday Calculation

Days per week Amount of holiday per annum (in days) inclusive of bank holidays
5 28
4 22.4 (rounded to 22.5)
3 16.8 (rounded to17)
2 11.2 (rounded to 11.5)
1 5.6 (rounded to 6) 

The latest guidance from the case of Harpur Trust v Brazel

Brazel was a music teacher at a school and worked different hours on a weekly basis through term time depending on interest. Initially their holiday pay was calculated based on an average of the previous 12 weeks worked (now to be 52 weeks average) with weeks that they didn’t work being discounted and another week being used in its place. The trust then moved to calculate holiday pay based on the percentage calculation of 12.07% of the hours worked to be paid as holiday. Brazel challenged this at tribunal. This case has been appealed several times and the final ruling of the Supreme Court has been released. This must now be applied to all businesses.

The ruling is that any employee is entitled to 5.6 weeks holiday regardless of their type of contract, therefore if an employee has a contract that stretches across a full year, or further years, even if it is zero hours, they are entitled to 5.6 weeks holiday per annum.

This means that any employee that is not on a fixed hour contract (full time or part time fixed) they are entitled to the 5.6 weeks holiday, with the holiday calculated based on the previous 52 weeks earnings average, if there is a week where the employee did not work, then the employer would include a further week back for a maximum of 104 weeks (2 years).

The tribunal commented that the law prevented detriment based on being a part time employee but did not mean that the employee could not be in favour.

As a result of this case, it is recommended, as far as reasonably practicable that employees have fixed hour per week (even if they are rota’d for example 40 hours per week on a rota system) to ensure the holiday hours and pay for an employee does not exceed the hours actually worked. It also means that all zero-hour employees, or casual employees with variations in hours will be entitled to 5.6 weeks holiday calculated at the average of their hours worked/monies received over a 52-week period.

For more information, don't hesitate to get in touch with Park City Consulting to find out how this change in employment law can affect your business. 

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