Holiday Pay for Workers with Irregular Hours.

The 2022 the Supreme Court decision in Harpur Trust v Brazel has had a major impact on how employers calculate the rate of holiday pay for employees on zero hours contracts or who work irregular hours. Key points of that decision are;

For Workers with no normal working hours, pay now has to be calculated by reference to the hours worked over an average of the last 52 weeks for which pay has been received.
It is now unlawful to pay rolled up holiday pay or apply the 12.07% percentage as per current practice
Therefore employers have to calculate the rate of holiday pay each time the bank worker takes time off.
The rate of holiday pay may therefore be higher on one occasion and lower on the following occasion.
This therefore is more of an administrative burden for employers.
If an irregular hours worker has for example been with the employer for three years, but in the last 52 weeks there are 15 weeks in which they earned nothing, then the employer needs to exclude those 15 weeks, and effectively look back an extra 15 weeks to ensure you calculate the figure based on the last 52 weeks they are actually paid.
If an irregular hours worker has been with the employer for (say) only 30 weeks and then asks to take off paid annual leave, the employer has to calculate the rate of average holiday pay based on those 30 weeks only.
If an irregular hours worker work has been with the employer for a total of 45 weeks and then leaves altogether, again the employer has to calculate the rate of average holiday pay based on 45 weeks only
Therefore us the BEIS holiday entitlement calculator) to calculate the (accrued) right to holiday pay. Then they need to calculate the rate of holiday pay as above.

The government’s BEIS guidance includes an example that sets out the effect of the decision in Brazel. The example takes account of the fact that, for holiday pay purposes, a week’s pay is calculated as the average weekly remuneration over a 52-week reference period (not including weeks in which no remuneration is paid.

The reference period must include the last 52 weeks for which they actually earned, and so excludes any weeks where no work was performed. This may mean that the actual reference period takes into account pay data from further back than 52 weeks from the date of their leave. However it should go back no more than 104 weeks; if this gives fewer than 52 weeks to take into account, then the reference period is shortened to that lower number of weeks. A paid week will include a week in which the worker was paid any amount for work undertaken during that week. Only if no pay at all is received in a week, should it be discounted as part of the 52-week reference period.

For workers on irregular hours and employed only for a few weeks or months, the BEIS guidance gives the following example:

‘A worker is employed for 2 weeks. They start to accrue holiday entitlement from day 1 but take no holiday leave during the 2-week period. At the end of their contract (termination of employment) they should be paid in lieu for all holiday accrued during this 2-week period. The holiday entitlement calculator can be used to calculate the paid leave that a worker has accrued. Holiday pay for the leave accrued should then be calculated using an average of the 2 weeks in which they were paid.’

This is a complicated and challenging calculation for employers to carry out. Do call us today on 0207 118 0950 or email us at info@reculversolicitors.co.uk if you wish to discuss this further.