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Do you know how many holidays and what holiday pay your employees are entitled to?

Whilst the Working Time Regulations Act 1998 (WTR) requires that employees are entitled to 5.6 weeks’ holiday, this is calculated by reference to “a week’s pay” – all well and good for full-time employees who receive a set salary, but what about part time workers? Add to this the fact that many employers are unaware of their employee contract wording when it comes to bank holidays, so when we have additional ones granted (for example for the King’s Coronation) how do you know if you have to give the day off?

 

If you have employees that work part-time hours or casual staff who work varying hours each week or indeed do not work each week, or, if you are a seasonal business that employs temporary workers, the standard method of calculating holiday pay does not work. In fact, the (now previous) standard method of using the figure 12.07% (percentage of hours worked) as a means of calculating entitlement (i.e. 5.6/46.4 x 100) has met with Supreme Court disapproval in the case of Harpur Trust v Brazel.

 

Mrs Lesley Brazel was employed by Harpur Trust as a clarinet and saxophone teacher on an “overarching” contract of employment. In her case, the Trust argued that the percentage method was only accurate where the a-typical employee works every week during the year and that where workers have not worked every week, applying the calculation to pay earned led to holiday pay being disproportionately high relative to pay for weeks worked. In the case of Mrs Brazel, this worked out at approximately 17.5%. This case has resulted in a government consultation being launched (Calculating holiday entitlement for part-year and irregular hours workers) which only just closed on 9th March 2023. Although HR professionals are eagerly awaiting the outcome of the government consultation, in the meantime, for part-time workers, the simplest solution is to calculate holiday pay in hours rather than days. However, bear in mind the complications to leave entitlement when a full-time worker changes to working part-time part way through the previous 52-week period.

 

The advice for employers calculating holiday pay for staff who don’t have normal or regular working hours, including zero-hour contract workers, is to calculate their average weekly pay (including basic pay, overtime, commission and bonuses) from the previous 52 weeks ensuring you only count the weeks in which they worked and for which they were paid. If some weeks occur in the 52 weeks where the worker did not work and therefore was not paid, you must count back another week, so the rate is based on 52 weeks in which pay was given, counting back to a maximum of 104 weeks to calculate the appropriate figure for holiday pay. If a worker has less than 52 weeks of pay, use the average pay rate for the weeks they have worked.

 

As holiday calculations for shift workers (including those working shifts of varying lengths) is untested by case law, it again might be more accurate to calculate holiday pay based upon hours as per the government guidance. However, complications can again occur for example in a situation where specific days off may lead to holiday entitlement being used up faster. See below scenario:

  • An employee works 37 hours per week broken down as 7.75 hours Monday – Thursday and 6 hours on Fridays.
  • If the employee takes lots of Fridays off as annual leave, this may lead to their annual holiday entitlement being only 192.5 hours instead of 207.2 hours.

 

One solution is to calculate average daily hours to work out holiday pay entitlement.

 

So that’s the law on statutory holiday entitlement and holiday pay. What about bank holidays?

 

The nation’s workforce might be delighted to be awarded an extra national bank holiday on Monday 8th May 2023 in honour of King Charles III coronation taking place on Saturday 6th May, but with accommodating changes to bank holidays and additional bank holidays in 2022, many employers have struggled with the subsequent resource, administrative and cost issues and are unsure if they are required to award the additional bank holidays.

 

In order to avoid breaking the law, you must check your contract wording. If it states the number of days (most commonly 20 days) with the words “plus bank holidays”, you will be obliged to award the day off as a paid holiday. Only where the words “plus usual bank holidays” are used, or your contract states the total number of days annual leave staff are entitled to (for example 28 days) “inclusive of bank holidays” you will not be obliged to award the day off and this will be at your discretion. This is because the King’s coronation is not a usual bank holiday and will be an additional day of holiday.

 

A major point to consider if you are obliged to award bank holidays is that employees that do not normally work on a Monday will be disadvantaged due to the fact that at least four bank holidays each year always fall on Mondays, and the additional bank holiday for the King’s coronation has also been given on a Monday. Compared with other part time workers who do work Mondays and full time workers who will have an additional day off, the disadvantaged employee could bring a potential claim under the Part Time Workers (Prevention of Less Favourable Treatment) Regulations. The solution here is for part time workers who do not normally work on a Monday, to have pro-rata days added to their holiday entitlement. For part time workers who work two days per week (e.g. Tuesday and Wednesday), the basic pro-rata public / bank holiday entitlement is 3.2 days.

 

Both the Brazel case and the addition of extra bank holidays for Royal events have spurred employers on to review and update their employee contracts. Make sure you have done the same for your business to avoid disgruntled employees bringing a claim against you. If you need HR related legislative advice for your organisation, please contact Mark Higgins, Employment Law Partner at Ralli Solicitors LLP by email to mark.higgins@ralli.co.uk or on his direct telephone number: 0161 615 0655.