Changes to casual workers holiday – what does it mean to businesses?
In the UK, workers have the right to a minimum of 5.6 weeks paid leave per year. This equates to 28 days for a full-time worker (and may or may not include bank holidays). Calculating the holiday entitlement of a worker with an irregular working pattern can complicate matters. For employees who work a different number of days each week it can be difficult to calculate the leave entitlement that is equivalent to a full-time workers 28 days.
The way that holiday is calculated for casual, or “part-year” workers (those employed on a permanent contract for the whole year but who work only some weeks and not others such as term-time workers, or those on zero hours contracts) has recently changed. Employers must immediately adopt a new method of calculating holiday entitlement to avoid falling foul of a recent supreme court judgment.
How holiday entitlement has been calculated
Previously, many employers had given casual and part-year workers a pro-rata holiday entitlement equivalent to 12.07% of hours worked (5.6 weeks (statutory annual leave entitlement) ÷ 46.4 weeks (the number of working weeks in a year after statutory annual leave is deducted) = 12.07%).
Changes after Harpur Trust v Brazel
The recent Supreme Court decision (Harpur Trust v Brazel  UKSC 21) has changed the way that holiday entitlement is calculated for part-year workers, casual workers, agency workers and other workers with irregular working patterns.
The holiday entitlement for workers with no normal working hours is now calculated based upon the average earnings in a 52-week reference period, ignoring any weeks in which the worker did not receive pay. This means that employers can no longer calculate holiday entitlement based upon the 12.07% method. The decision has resulted in some casual workers receiving more paid leave than part-time workers who work the same total number of hours across the year.
Naturally the decision in Harpur Trust v Brazel has created much confusion and an increase in claims in the Employment Tribunal.
In an attempt to tackle the disparity caused by the decision, the government commenced a consultation on 12 January 2023 which proposes to make holiday entitlement proportionate to hours worked. It is currently proposed that a 52-week holiday entitlement reference period will be introduced for part-year workers and workers with regular hours that is based upon the proportion of time spent working over the previous 52-week period and will take into account weeks in which no work was done.
The government has also suggested that for agency workers whose reference period for holiday pay is likely to go back further than 52 weeks, holiday pay should be calculated based upon a reference period that would use the most recent 52 weeks including weeks when no work was done.
The consultation is currently expected to end on 9 March 2023.
What should employers do
It would be prudent for employers to review their current holiday practices to ensure that the decision in Harpur Trust v Brazel is followed moving forward to minimise the value of any claims for unlawful deduction from wages.
Employers may also wish to consider offering new workers with irregular hours fixed term contracts. Giving casual or zero-hours workers some working hours in each week or as often as possible will also reduce the number of weeks that are discounted.
Unlawful deduction from wages claims
Since the decision there has been an increase in unlawful deduction from wages claims in the employment tribunal is from workers who have had their holiday pay calculated based upon the 12.07% method.
Unlawful deduction from wages claims generally need to be brought either during employment or within three months of the final pay date. Further, such claims can only include a maximum of two years backdated holiday pay from the dates of the claim.