Last year the Supreme Court handed down its Judgment in the case of Harpur Trust -v- Brazel. It ruled that part-year workers or employees on contracts that subsist year-round, whether hours are normal or irregular, are entitled to:

• The same statutory holiday as workers who work all year round, a minimum of 5.6 weeks or the equivalent of 28 days (for a full-time, five day a week worker). It is no longer possible to pro-rata holiday allowance (save for any contractual holiday above the statutory amount).
• That pay can no longer be calculated using the 12.07% method. You must calculate holiday pay by looking at the work undertaken across a 52 week reference period, discounting the weeks in which they did not receive pay.

If you have not yet done so, you should review your current holiday practices to ensure they comply with this decision. This may also require amendments to contracts, handbooks and payroll processes.

Who does this apply to?

If you are a grower, farmer, manufacturer or distributor engaging staff on a seasonal basis, a zero-hours contract, or kept on a bank, and they have a permanent contract that continues for a full year or more, even if that individual only works some weeks or months of the year, this ruling will apply to you.

What does this mean for you?

All workers engaged on a permanent contract are entitled to take and be paid for a minimum of 5.6 weeks annual leave per year.

For example, a worker who was employed on a permanent contract and worked for a summer season of 12 weeks would have been entitled to 6.5 days holiday. They are now entitled to 28 days paid annual leave.

If you are currently applying the practice of using the 12.07% method to calculate holiday pay, you should stop this practice and move to the calculation method set out in the Employment Rights Act 1996, using the ‘week’s pay’ method.

This decision also means that employers will need to ensure that detailed records are kept of each hour worked and appropriate calculations are carried out when leave is taken. This is likely to place a significant additional administrative burden (in addition to the financial burden of the cost of the increased holiday entitlement) on employers engaging staff in this way.

Are there any instances when this will not apply?

If you are genuinely hiring a worker on a fixed term contract to cover a season or for a fixed assignment on a per assignment basis, provided that the contract starts and expires for that season or the assignment and a P45 is issued at the end of each season/assignment, with significant gaps between any new engagement so there is not continuity or overreaching contract, this ruling in respect of 5.6 weeks holiday entitlement may not apply. Each matter will be fact sensitive and will need to be considered based on all of the circumstances and what is happening on a day-to-day basis, not just what is written in any contract.

You would still need to ensure that the amount of holiday pay is calculated correctly in accordance with the Employment Rights Act 1996 and not using the 12.07% method.

What are the risks if we don’t comply?

Workers and employees may bring claims for unlawful deduction of wages (going back up to two years), breach of contract and/or under the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000.

Dealing with and defending such claims or even trying to settle a claim is likely to be time consuming and costly for your business.

Is there any more positive news?

The decision of this case has highlighted a potential unfairness benefitting part-year workers on permanent contracts.

As a result, in January 2023, the government launched a consultation in respect of holiday entitlement, asking whether the 5.6 weeks’ should remain for part-year and irregular workers or whether this should be pro-rated for the number of weeks actually worked. This would bring part-year workers in line with the approach taken for full-year part-time workers.

The consultation closed on 9 March 2023 and we await the outcome from this, but there is currently no proposed time scale.

There is also the possibility that holiday pay and entitlement could be affected by the changes to EU law.

You should be aware and keep a look out for further changes which could impact on this position.

You should also remember that:

• It is possible to require employees to take statutory holiday on specified dates, so long as the required notice of at least twice the length of the period of leave that the worker is being ordered to take; and
• You may refuse leave that has been requested by serving a counter-notice. This must be given at least as many calendar days before the date on which the leave is due to start as the number of days which you are refusing.

What do you need to do?

If you have seasonal workers or zero-hours workers, you will need to review how they are engaged and whether this decision applies to them.

If it does, you will need to ensure  they receive the correct holiday entitlement and pay for that holiday.

It may be necessary to make contractual changes, but you should be cautious and take legal advice before attempting to make changes, as this may give rise to further claims.

For further information on employing seasonal workers or advice on any other employment law matter, please contact Louise Brenlund, partner and head of employment law at Warners Solicitors on 01732 770660, l.brenlund@warners.law https://www.warners-solicitors.co.uk/people/louise-brenlund/ 

 

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.