COMPLIANCE
Holiday entitlement and pay
LoraMurphy ACIPP, CIPP policy and research officer , outlines recent significant changes to the rules
A long with the usual raft of changes to payroll legislation synonymous with the start of a new tax year, some substantial changes to the calculation of holiday entitlement and pay were introduced which will need to be observed from 6 April 2020. (Another key change from this date gives new workers a ‘day-one’ right to a written statement of particulars; see page 23.) A fundamental principle is that employees should not be deterred from taking their holiday entitlement by receiving pay which equates to anything lower than that which they would have received if they had been at work. Holiday leave and pay are statutory rights which employers should ensure they are treating correctly. Although the coronavirus outbreak has been dominating our life and work, it remains essential that payroll professionals are up-to-date with the more familiar ‘business as usual’ payroll items – such as the changes to holiday entitlement and pay. Holiday entitlement The Working Time Regulations 1998 (’the Regulations’) require that workers are granted a minimum of four weeks of leave entitlement annually. The UK enhanced this provision so employers must provide 5.6 weeks’ worth of annual leave to staff. Employees are entitled to this right irrespective of whether they work full-time, part-time or under a zero-hours contract,
and they begin to accrue leave from the first day that they start work. A holiday entitlement calculator is available online at https://bit.ly/37GPRRr. It is a very useful tool for both employers and individuals to check holiday entitlement either for a full- or a part-year, for a variety of entitlement types. These include entitlement based on days worked per week, hours worked per week, casual or irregular hours, annualised hours, compressed hours, and shifts. Historically, in order to calculate holiday entitlement for workers with irregular hours, a percentage of the hours that they had worked was used. Updated guidance from the Department of Business, Energy and Industrial Strategy – see http://ow.ly/ AKJ030qze4c – states that holiday pay should be calculated by reference to the number of weeks that the individual has worked. Historically, 12.07% was the portion of hours worked that was used to calculate holiday entitlement and pay for certain workers. The outcome of a recent case – Harpur Trust v Brazel (https:// bit.ly/2RPbgRw) – saw this method of determining holiday entitlement removed from guidance. The aforementioned entitlement calculator was temporarily removed, as it used 12.07%, but reappeared without this calculation method. Brazel’s working hours varied weekly depending on the demand for her to give
lessons. She was paid by the hour, did not complete any work during school holidays and was required to take her holiday entitlement during those periods. The school calculated holiday pay based on 12.07% of the hours that she had worked, which they paid to her in March, August and December each year. Brazel’s stance was that she had been penalised by this calculation, and that under the Regulations her holiday pay should have been based on an average of her previous twelve weeks’ remuneration. Using 12.07% meant that her holiday entitlement had been prorated both on the basis that she was part-time but also because she only worked part of the year. The employment tribunal’s verdict was favourable to the employer, but on appeal the employment appeal tribunal subsequently agreed with Brazel. The employer’s appeal to the Court of Appeal was rejected, with the Court referring to the Part-Time Workers Regulations which give protection to part-time workers preventing them receiving less favourable treatment than full-time counterparts. Reference period The reference period for calculating holiday pay for workers with no fixed or regular hours has been extended significantly from using an average of pay over the previous twelve weeks to 52 weeks, in order to adopt a fairer approach to paying individuals working flexible hours. This change, which took effect on 6 April 2020, is designed to remove the disadvantage that workers in sectors with seasonal variations in pay experience when receiving holiday pay. These individuals are frequently required to take holiday during
...statutory rights which employers should ensure they are treating correctly
| Professional in Payroll, Pensions and Reward | June 2020 | Issue 61 26
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