16 January, 2023
In July 2022, the Supreme Court held that holiday entitlement under the Working Time Regulations 1998 for permanent part-year workers should not be pro-rated and that anyone on a year-round contract is entitled to 5.6 weeks of holiday pay, calculated using a holiday entitlement reference period of 52 weeks to determine their average weekly pay, ignoring any weeks they did not work. The government estimates that 320,000 and 500,000 permanent term-time and zero-hours contract workers will receive more holiday entitlement as a result of this. Whilst a lot of the focus has been on the Education sector, the Government believe that 63% of affected workers, work in other sectors.
Many will agree that this decision has caused a lot of confusion for employers and we've received significant feedback that the decision causes significant issues for employers. One of the primary concerns resulting from the judgment is that part-year workers are entitled to a larger holiday entitlement than part-time workers who work the same total number of hours across the year and the discrepancy can in some case be significant.
In order to address this disparity, the government has issued a consultation paper to try and understand the implications of the judgment on different sectors including those with complex contractual arrangements, such as agency workers. The paper seeks the input of both employers and workers to try and ensure that any changes made do not have an adverse effect upon other aspects of the legislation.
The suggestion within the consultation period to remedy this situation is to amend the calculation so that the reference period will also include weeks where the employee has worked. This should largely remedy some of the biggest issues caused by this judgment. For instance an employee who worked 35 hours a week for only 8 weeks of the year and worked at no other time of the year would get 5.6 weeks holiday based on them working for 35 hours a week, this would effectively mean they get another 5.6 weeks at close to full pay. Under this proposed change they would instead have their holiday pay based on them working 35 hours for 8 weeks a year, and 44 for the rest of the year which will bring down the holiday pay considerably.
The consultation closes on 9 March 2023 and more information, including how you can contribute to the consultation can be found here. Further information regarding how to get involved in the consultation can be found at page 6 of the paper.
For more information contact James Barron in our Employment & HR department via email or phone on 0161 918 0017. Alternatively send any question through to Forbes Solicitors via our online Contact Form.
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