New legislation will clarify holiday entitlement for part-year workers

New legislation is to be introduced following a consultation on calculating holiday entitlement for part-year and irregular hours workers.

It follows the the Supreme Court’s ruling in the Harpur Trust v Brazel case, which resulted in part-year workers being entitled to a greater annual leave entitlement than part-time workers working the same number of hours across the year.

The draft regulations (The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023,) have been laid before Parliament and are due to come into force on 1 January 2024. 

How will holiday be calculated in the new legislation?

An accrual method for calculating holiday entitlement will be introduced for irregular hours workers and part-year workers and will be the method of calculation in their first year of employment and beyond. Entitlement will be calculated as 12.07% of hours worked in a pay period. 

Other workers will continue to accrue leave at 1/12th of their entitlement on the first day of each month during their first year of employment.

The draft regulations set out how to apply the 12.07% accrual method when irregular hours workers and part-year workers have been on sick leave or statutory leave during the leave year and how to deal with holiday entitlement when the 12.07% calculation produces entitlement which includes fractions of an hour. 

What is meant by irregular hours workers and part-year workers?

The draft regulations state: 

a worker is a part-year worker, in relation to a leave year, if, under the terms of their contract, they are required to work only part of that year and there are periods within that year (during the term of the contract) of at least a week which they are not required to work and for which they are not paid.

a worker is an irregular hours worker, in relation to a leave year, if the number of paid hours that they will work in each pay period during the term of their contract in that year is, under the terms of their contract, wholly or mostly variable;

We see from the definitions that whether a worker will be a part-year or irregular hours worker depends on the terms of their contract of employment, rather than the hours they actually work. It is therefore important that employers have contracts in place for these staff, this is particularly relevant for irregular hours workers who in a school and college context tend to be exam invigilators, and supply or peripatetic teachers. 

For schools and colleges, subject to the terms of their contracts of employment, term-time only staff will fall within the definition of part-year worker. 

Rolled up holiday 

In addition, the government will sanction rolled-up holiday pay (RHP) for irregular hours workers and part-year workers only. RHP is the practice of paying holiday pay in addition to a worker’s hourly rate while the worker is working, rather than at the time of the holiday. RHP was previously considered unlawful although in practice it was very commonly done. 

Accordingly, this change is welcome, particularly for schools and colleges in respect of term time staff. The draft regulations do confirm that if paying RHP any itemised pay statement provided by the employer to the worker must indicate the amount of holiday pay that has been paid for the period to which the statement relates.

When will the new regulations apply?

The draft regulations must be approved by resolution of both Houses of Parliament and are expected to be in force from 1 January 2024. They are stated to apply to leave years beginning on or after 1 April 2024 and therefore following the coming into force of the regulations, it will be lawful for employers to use the calculation in respect of their upcoming leave years commencing on or after 1 April 2024. For many schools and colleges whose leave year commences on 1 September this means that the calculation will apply to the leave year commencing 1 September 2024

What should schools do now?

What schools and colleges need to do now will depend on the approach they have taken to date, including in relation to holiday pay claims. Stone King will provide further guidance in due course, although if you have questions relating to your particular circumstances we would recommend contacting us directly. 

Should you have any questions please get in touch with your usual Stone King contact; the consultation outcome document can be read here.

The draft regulations (The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 can be read here.