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Government launches holiday pay consultation for irregular hour/part-year workers

The government has launched a consultation into the way holiday pay and entitlement is calculated for temporary, part-year and zero hours workers.

The consultation proposes to introduce a holiday entitlement reference period for part-year employees and those who work irregular hours so that their holiday pay and entitlement is directly proportionate to the time they work. It also aims to understand how entitlement is currently calculated for agency workers, how the consultation proposal might be implemented, and review and potentially amend leave entitlement legislation in settings including care homes.

The consultation will close on 9 March 2023. It follows the UK Supreme Court’s ruling last July during the Harpur Trust v Brazel case that annual leave entitlement could not be pro-rated for part-year workers. Those on a term-time, zero-hours or irregular hours contract are entitled to receive 5.6 weeks of paid annual leave regardless of how many weeks per year they worked.

Speaking to Employee Benefits, Kate Palmer, HR advice and consultancy director at Peninsula, said: “The government proposes legalising the 12.07% method, to ensure that leave entitlement is proportionate to working hours, as well as using a 52-week reference period, including non-working weeks, to calculate leave entitlement. Effectively, this could see part-year workers treated comparably to part-time workers in their annual leave entitlement.

“Under current laws, part-year workers can receive considerably more leave and pay than a part-time worker, despite working the same number of hours in total over the course of a year. Any changes to current legislation will be particularly important for those in the education sector who commonly use term-time contracts. However, it could also pose a new HR headache for any employer which has zero-hours, variable-hours, or agency staff.”

Julia Kermode, founder of Iwork, added: “Bringing in these changes will simplify holiday pay for employers and make it much easier for temps to work out how much they’re entitled to and, crucially, claim it. As it stands, many temps don’t even realise they’re entitled to holiday pay. It means tens, potentially even hundreds of millions of pounds, are going unclaimed every year.”

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