Government consultation on holiday pay for part year and irregular hours workers

Authored by ARAG

The Government has issued a consultation into the calculation of holiday entitlement for part-year and irregular hours workers, with responses to be received by 9 March 2023. In the recent decision of Harpur Trust v Brazel, the Supreme Court has held that part-year workers on permanent contracts should receive 5.6 weeks of paid annual leave and holiday pay should be calculated using an average of weekly pay over a 52-week reference period, which ignores weeks where no work is undertaken. The effect of the Supreme Court’s decision is that part-year workers could be entitled to more paid holiday than part-time workers who work the same total number of hours but regularly across the year.

The Government is considering introducing legislation which allows employers to pro-rate holiday entitlement for part-year workers so that they receive leave in proportion to the total number of annual hours worked. This calculation could be done using a 52-week holiday entitlement reference period based on the proportion of time spent working over the previous 52-week period, including weeks without work when calculating the average pay per working week. The effect of this would be that holiday entitlement would be directly proportionate to hours worked.

The purpose of the Government’s consultation is to seek comments on how the Harpur judgment will affect workers in different sectors and a response is to be published following the consultation. It is hoped that the Government’s response clarifies this particularly complex area of employment law and provides clarity and fairness to both employers and employees.