Harpur Trust v Brazel – Launch Of Government Consultation On Calculating Holiday Entitlement For Part-Year & Irregular Hours Workers

The Supreme Court decision in the case of Harpur Trust v Brazel has attracted a lot of media coverage in recent months after it resulted in part-year workers being entitled to a larger holiday entitlement than part-time workers who work the same number of hours across the year. The decision has had far-reaching consequences for employers, leaving many needing to change their approach to calculating holiday entitlement and associated pay for part-year workers.

In response, the Government has launched a consultation in order to try and understand the implications that the outcome of the case might be having across different sectors.

The position following Harpur Trust v Brazel

This case and the principles stemming from it concern ‘part-year workers’. Essentially, these are workers who work varying hours during only certain weeks of the year but have a continuing contract throughout the year i.e. workers whose work is irregular (for example, zero-hours workers).

As above, the case has significant ramifications where the calculation of holiday is concerned. Prior to the judgement in Harpur Trust v Brazel, many employers calculated holiday entitlement and associated pay for part-year workers based on the 12.07% method, with the worker accruing holiday entitlement at the rate of 12.07% of the hours worked. The resulting figure was then multiplied again by the worker’s hourly rate of pay to calculate their holiday pay. This method was supported by Acas’s guidance.

However, the Supreme Court in the Harpur Trust v Brazel case confirmed that part-year workers who are in employment for a full leave year are entitled to 5.6 weeks holiday entitlement in each holiday year and that this should not be pro-rated so that it is proportionate to the amount of work the worker actually performs each year. The holiday pay in respect of this leave should then be calculated based on the average pay that the worker received over the previous 52 weeks in which they had worked. If the worker had not worked in a given week and, therefore, not received any pay in respect of that week, that should be disregarded and an earlier week where work was performed and pay received should be used in its place for the purposes of calculating holiday pay (with employers being required to go back to up to 104 weeks back, if necessary).

As a result, part-year workers are now receiving more holiday entitlement, and thus overall holiday pay, than part-time workers who work the same number of hours across the year. The Government estimates that between approximately 320,000 and 500,000 zero-hours workers and permanent term-time workers will now be receiving more holiday entitlement than before the Harpur Trust v Brazel judgement. Similarly, between 80,000 and 200,000 agency workers are estimated to be receiving more holiday entitlement than they were before.

The Government consultation and next steps for employers

Given the discrepancy in holiday entitlement and, therefore, pay that now exists between part-year/irregular hours workers and part-time workers, and the number of workers affected by this, the Government has launched a consultation to better understand the implications of Harpur Trust v Brazel, enabling it to consider whether an alternative approach may be more suitable. The stated purpose behind this is to “ensure that holiday pay and entitlement received is proportionate to time spent working.”

In respect of an alternative approach, the Government has suggested that a “52-week holiday entitlement reference period for part-year workers and workers with irregular hours, based on the proportion of time spent working over the previous 52-week period” may be introduced. This would mean there would no longer be a requirement for employers to disregard weeks in which a part-year/irregular hours worker had not worked and had, therefore, not received any payment in respect.

The Government has suggested that the consultation may be of interest to:

The consultation opened on 12 January 2023 and will remain open until 23:59 on 9 March 2023.

Following the consultation, the Government will consider the responses and decide whether a new approach should be adopted in respect of holiday entitlement for part-year/irregular-hours workers.

If a new approach is to be adopted, employers will need to be prepared to modify the way they calculate holiday entitlement and associated pay for part-year/irregular-hours workers.