Changes to Holidays for Irregular Hours Workers 2023

Following the Harpur Trust versus Brazel judgement of 2019, there has been much confusion surrounding calculating leave entitlement and holiday pay for employees who work irregular hours.

For employees who work a set number of hours each week, calculating their leave entitlement is relatively simple. Full time employees are entitled to 5.6 'weeks' of leave each leave year, which usually equates to a statutory minimum of 28 days. For employees who work part time, their leave entitlement is simply equivalent to their usual 'week' multiplied by 5.6 (so for someone who works 3 days a week, their yearly leave entitlement should be 16.8 days - generally though, this would be rounded up to 17).

This calculation is not as simple for employees who work irregular hours on zero hours contracts, or work for part of the year but remain on contract for the full year.

In the Harpur Trust vs Brazel case, it was established that the employee's holiday pay should be calculated based on a 52 week reference period, excluding any weeks where they did not work. For part year casual workers such as Brazel, calculating their entitlement in this way increased the holiday pay due, when compared to calculating holiday pay and entitlement using the well established 12.07% accrual method.

As of November 2023, the Government has provided new guidance on this issue. They will not be taking forward proposals for a 52 week reference period, and therefore the issue of whether or not to exclude weeks not worked in that reference period (as in the Harpur Trust vs Brazel case) is now largely irrelevant. The 52 week reference period will only be recommended for calculating accrued annual leave when employees have been on long term sick leave, maternity or family related leave.

Instead, they propose to calculate an employee's annual leave entitlement using the 12.07% accrual method, where an employee accrues 12.07% of the hours worked in each pay period. During their consultations with employers, it was clear that most businesses found the 12.07% method much easier to implement and it created less of an administrative burden.

The new Government advice also introduces 'rolled-up holiday pay' for employees who work irregular hours, which is currently deemed unlawful due to a 2006 European Court of Justice ruling.

Rolled-up holiday pay is given as an addition for each pay period, as a separate item to the employee's regular pay on their payslip. For employers who choose to use rolled-up holiday pay, the government will legislate to advise that pay is calculated based on the employee's total pay for the period, to avoid further complicated calculations.

The consultation came to the conclusion that rolled-up holiday pay should only be applicable for irregular hours workers and part-year workers; in cases where employees work full time or part time all year, there would be no real benefit of implementing rolled-up holiday pay and it risks disincentivising employees from taking their leave.

Overall, these new changes should simplify holiday calculations for employers with irregular hours workers, and reduce the amount of admin required.