The Government Publishes Outcome Of Consultation into Holiday Pay.

New Dawn is pleased to confirm that the government has now published the long-awaited outcome of its consultation into holiday pay.

You will recall that the Supreme Court case of Harper Trust v Brazel introduced significant legal changes last year, meaning that employers were no longer permitted to use the “percentage method” to calculate holiday entitlement for workers who work irregular hours or part of the year. This meant that calculating holiday as 12.07% of hours worked for these flexible and zero hours workers was set to become a thing of the past.

We reported at the time and in our November employment law update seminar that the Brazel judgment created a potentially disproportionate outcome, because workers who work irregular hours or part year stood to accrue proportionately more holiday pay than their colleagues working fixed hours or full year. Fortunately, the government has recognised that this needs to be resolved.

The government has announced an intention to issue new legislation to reintroduce the “percentage method” as a fair and lawful way to calculate holiday entitlement for workers who work irregular hours or part of the year. We await the legislation, but can confirm that:

• You will be able to calculate holiday entitlement on the basis of 12.07% of hours worked.
• If your basic holiday entitlement is more generous than the statutory minimum of 5.6 weeks (which is equivalent to 28 days including bank holidays for full time staff), you may need use an adjusted percentage but we can help assess this for you.
• You will be able to pay “rolled up holiday pay” which we expect to mean an hourly rate that includes (i) pay for an hour of work of at least national minimum wage plus (ii) a top up of at least 12.07% to pay out the holiday pay earned on that hour of work. This will reduce the administration of calculating and allocating holiday pay for staff who work irregular hours, such as those on zero-hour contracts.

We will be covering this and other updates in our Employment Law Update seminar next week. If you’ve already accepted our invite, we’ve ordered you some breakfast and look forward to seeing you soon!