COMPLIANCE
The complexities of getting holiday pay and entitlement correct
Tim Bridgett, employment taxes senior manager, PSTAX, discusses some prolific cases which have shaped the way holiday entitlement and pay are calculated
M any employers still aren’t getting holiday pay calculations right. There have been several high- profile cases which have raised significant questions surrounding the calculations behind holiday pay, which will potentially affect all employers in Great Britain. Any overtime an employee is obliged to perform must be included in holiday pay calculations. Guaranteed or compulsory overtime (where, even if the employee isn’t called on to work it, but the employer is liable to pay them for it) is regarded as normal working hours and must be included in holiday pay calculations. Following the Bear Scotland case, non-guaranteed overtime (where the employee is obliged to work overtime if required, but the employer isn’t obliged to provide it or pay in lieu) must also be included. To complicate matters further, the Employment Appeal Tribunal in 2019 (Flowers and others v East of England Ambulance Service National Health Service Trust) said employers should also include voluntary overtime shifts in workers’ holiday pay if they were regular enough . An appeal was made to the Supreme Court but was subsequently withdrawn in 2021, following
Perhaps the most significant case affecting our public sector clients now is that of The Harpur Trust v Brazel. In this 2019 case, the Court of Appeal (CA) clarified that holiday pay shouldn’t be pro-rated for staff who work only part of the year. In that case, the CA held that the commonly used calculation method of 12.07% as a way of calculating holiday pay for someone who doesn’t work throughout the whole year (term-time workers, zero hours music teachers, sports coaches and exam invigilators) is unlawful, because it results in the individual receiving a pro- rated amount of the statutory 5.6 weeks holiday (which isn’t permitted by the Working Time Regulations 1998). To calculate holiday pay for part-year workers, the CA determined that, at the time holiday is to be taken, employers should identify ‘a week’s pay’ in accordance with the Employment Rights “Employers should also include voluntary overtime shifts in workers’ holiday pay if they were regular enough”
Act 1996 and multiply that figure by 5.6. When calculating a week’s pay for an individual with no normal working hours, an employer is required to average hours worked in the reference period of 52 weeks prior to the holiday being taken (discounting any weeks in which no pay is received because the individual didn’t work, including school holiday periods, potentially increasing the ‘count-back period’ as far back as 104 weeks to achieve 52-weeks’ worth of pay data). “When calculating a week’s pay for an individual with no normal working hours, an employer is required to average hours worked in the reference period of 52 weeks prior to the holiday being taken”
Back in June 2020, the Supreme Court granted Harpur Trust permission to appeal the CA decision. This appeal took place in
‘communications from the parties’ involving a settlement out of court.
| Professional in Payroll, Pensions and Reward | July - August 2023 | Issue 92 32
Made with FlippingBook - Online magazine maker