HOT TOPIC
The latest case causing some pain is the long standing Harpur Trust v Brazel case, heard by the Supreme Court (SC) that resulted in a final ruling. The SC confirmed that: l ‘rolled-up’ holiday pay wasn’t lawful, so confusion ended l leave cannot be pro-rated for those workers who work part of the year as Brazel did. One of the concerns is that, although this was tested on those who don’t work every week, it didn’t specifically look at those who work every week, but on a part-time basis, thus causing the UK government and employers an issue in fairness. Under the current ruling, many employment law advisors are steering employers to ensure all part-time workers are entitled to the full 5.6 weeks leave and not a pro-rated amount but, those who have part- time hours, fixed term contracts etc. aren’t impacted by this ruling. Subsequently, we saw the release of the recent government consultation document requesting feedback on how the UK should implement this ruling to create fairness. Is it reasonable that all workers receive 5.6 weeks whether full-time or not? This may mean, that if full time, you get the 5.6 weeks, but part-time workers receive the same, which could result in a case in the future from full-time workers? What’s happening right now? Hot off the press… Under the Retained EU Law Bill, the government has taken the opportunity to look at holiday pay and leave, which has been welcomed by employers and the payroll and human resource industries. At the time of writing, the government hadn’t finished considering the responses to the consultation, ‘Calculating holiday entitlement for part-year and irregular hours workers’ , which closed on 9 March 2023. The key considerations in the consultation include those listed below (but please note there are lots of deviations): l assessing whether there should be a 52- week holiday entitlement reference period, which is separate to pay reference period, and includes weeks where work wasn’t performed l not to implement the ruling of the Harpur case, but instead return to using the ’rolled-up’ holiday pay calculation of 12.07% multiplied by total hours worked l make the 52-week reference period fixed, rather than rolling
l other deviations of the 12.07% calculation
that some case in the future will result in backdated calculations and payments. Due to the administrative burden of calculating voluntary v involuntary overtime, many employers include all overtime, all commission, and where there are regular payments of bonus, they’re included too. My general rule of thumb is that if the payment’s regular and when someone’s on leave they’d usually expect to receive pay within that component, then most likely it should be included. Remember though, it’s case law and what we really need are regulations to stipulate exactly when something should be included. Another frequently asked question I receive is, ‘rather than carrying out a calculation every month for salaried workers who have worked, for example, overtime, can I do it once a year?’ This is common practice to ensure that, at a point in the year, a 52-week look up is carried out for total pay, including commission and / or overtime etc., and then payment made. If doing this, you’d have to make sure you did this when someone leaves the business too, to ensure they’ve been paid the correct amount for holidays. However, you should also note that guidance from the Department for Business and Trade (DBT) recommends that, if the correct payment for leave cannot be calculated at the time of taking the holiday due to payroll cut offs, then the earliest pay period that can include it should be used. Now we have a state of flux on holiday entitlement and pay, because if you don’t know the entitlement, how can you calculate the pay due? Let’s hope the UK can finally provide some comfort to employers and employees alike on entitlement and the pay that goes with it. Let’s also hope that this DBT guidance spanning multiple pages can be reduced to just a couple. The guidance as it currently stands is located here: https:// ow.ly/FPtp50OQp8U. n “Now we have a state of flux on holiday entitlement and pay, because if you don’t know the entitlement, how can you calculate the pay due?”
l implementing the government’s preferred approach to calculating holiday hours for a particular day off (especially where irregular hours are worked each day) and using the reference period to calculate a flat average working day. This would mean when a worker takes a day off, they would use the number of hours calculated from their average working day as their entitlement. As we await the outcome of the consultation, employers still need to grapple with what’s in place now. Within the bureau environment, I’ve found that many employers look to payroll for the answers on what they should be doing. This creates a potential problem for bureaus, as without HR data and / or timesheet data, payroll systems don’t record the actual hours requested by an employee. There are some systems which will keep a record of the total permitted and then provide a reducing balance as the employer advises payroll / bureau of the amount taken and / or some will reduce based on a holiday pay / hours component, but otherwise the information sits elsewhere. Where you can integrate and / or the employer can provide you the data you need, many resort to using Excel spreadsheets to record, and then calculate, the annual leave payment due to import into the payroll system. This does work if you have a great template, which can retrieve the pay from components such as commission and overtime and include the correct hourly rate, etc. However, many of us would prefer something simpler, such as a payroll system which could calculate automatically and correctly. I might be looking through my rose-tinted glasses again, but I do live in hope. Many complications for pay resulted from the Bear Scotland Ltd case, which followed the Lock v British Gas Trading Ltd case regarding commission payments and then involuntary overtime. Once again, however, these rulings only applied to the 20 days and not the UK 28 days. This still causes issues now, as you have the 52-week reference period, looking at the amount and what’s included in respect of earnings, to ensure you consider the right amount to work out holiday pay. I’ve been asked, ‘should I include a bonus as well, or expenses, or indeed, anything and everything to avoid any future case ruling?’ This is where employers are really struggling, as there’s now a fear
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| Professional in Payroll, Pensions and Reward |
Issue 92 | July - August 2023
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