Does your business have part-year workers?
The Supreme Court has ruled that workers who work for part of the year are now entitled to holiday allowance.
Part-year workers will be entitled to the same paid holiday entitlement as colleagues who work all year round.
Employers who previously pro-rated the holiday entitlement of people part-year workers on permanent contracts will have to change their practices, and could also face claims for underpaying staff in the past.
Who does the new seasonal holiday pay ruling apply to?
Examples of those affected are seasonal workers, term-time only workers and those working under a zero-hour contract.
Businesses which employ several seasonal workers and could be heavily affected by the changes include retail stores and outlets, schools and academies, accountancies, sports-based companies and event organising businesses.
For the ruling to apply:
- the worker is a seasonal or part-year employment, (i.e. a contract that comprises of the full working day, say 40 hours, but is not over a full year)
- the worker must have a permanent contract that lasts for the full year (even if the individual only works some weeks or months of that year)
- the worker must have worked a minimum of one year prior
As per the correct application of the Working Time Regulations, permanent contract workers are entitled to 5.6 weeks of paid annual leave per year.
Employees who have not yet worked for a year may be able to take paid holiday if agreed with the employer.
Some employers might include overtime, commission and bonus payments in your full 5.6 weeks’ paid holiday, but you do not have to. This is because the law on overtime, commission and bonus payments being included in holiday pay is based on the EU Working Time Directive, which is 4 weeks’ holiday only.
What is the effect of this season worker ruling?
This has a profound effect and may lead to some calculations which feel disproportionate to employers with these types of workers.
In the written contributions to the Harper Trust vs Brazen case, the plaintiff post-ruling commented “the construction upheld by the court of appeal leads to an absurd result, that absurdity being that a worker in Mrs Brazel’s position, receives holiday pay which represents a higher proportion of her annual pay than full-time or part-time workers who work regular hours.”
In defence, the judges said “the methods proposed by Harper would require ‘extremely complicated’ calculations and for all employers and workers to keep detailed records of every hour worked, even if they were not paid at an hourly rate.”
There is a worry that this ruling is going to place significant financial burdens non businesses with seasonal part-year workers. Clarification around holiday pay is important as not providing employees with their rightful allocation could result in a disastrous claim.
Contact Romero Insurance Brokers if you believe this ruling affects you and your potential contacts with seasonal employees. We will help you determine what changes need to be made.
What changes in your business need to be made?
If you have any individuals who are seasonal workers, term-time only workers or who are working under a zero-hour contract, you will need to review how their holiday entitlement is calculated.
If your current methodology is based on the 12.07% calculation, advised by ACAS, be aware this is no longer correct.
To calculate what that individual should be paid whilst on holiday, the employer should take an average of the employee pay over the previous 52 weeks.
That amount will be their “week’s pay” and if they take a week’s holiday, that’s the amount you must pay them. If they take less than a week’s holiday, you will have to work this out as a percentage of a week and calculate the payment accordingly.
If you require assistance calculating correct holiday pay, contact your account manager at Romero Insurance Brokers. It important our clients are no longer using the previous out-dated 12.07% rule, and are not at risk of a claim.
Do the new holiday pay changes affect part-time workers?
This ruling does not affect part-time workers. The number of days holiday a part-time worker receives is dependent on the number of days they work per week. The new ruling is only for seasonal workers on a permanent contract.
For example, for a part-time worker working half the equivalent full-time week, their entitlement will transpire into a proportion of the full-time entitlement. Therefore, as they only work half of the week, they will be entitled to receive 14 days of holiday (rather than 28 days as received by full-time workers).
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