The new financial year brought in a raft of changes to holiday entitlement. Whilst many welcomed the news, many workers and agencies are confused about what this means to them, and more importantly how to calculate it.

The catalyst for change was the conclusion of the Harper Trust vs Brazel case, rolled up holiday and Brexit. The result was the amendment, revocation and transitional provision of the Employment Rights Regulations 2003.

The Harper Trust vs Brazel case involved a very specific set of circumstances, but has implications for all atypical workers on variable hours and those who work part year, which made the case of critical importance in the matter of holiday pay and leave calculation.

Brazel was considered a ‘part year employee’. They were a music teacher, employed on a permanent, zero-hours term-time basis. They were required to work during term-time only, and their hours would vary in accordance with pupil needs. They had to take their holiday outside of term time, and the method the school used to calculate this was the “percentage method”. Essentially, the school would calculate 12.07% of their hours each term, and pay them at their hourly rate for resulting hours in the subsequent holiday period.

Brazel argued that this was not correct and they should be paid based on their average hours over 12 weeks in which they had worked. As their employer disagreed with this, a claim was raised. The case made it all the way to the Supreme Court which in short, ruled that “the amount of leave to which a part-year worker under a permanent contract is entitled is not required by EU law to be, and under domestic law is not, prorated to that of a full-time worker”.

The case by large has brought about a significant change, meaning that the use of 12.07% of a workers hours should not be used, as this can leave some worse off. Instead, all Irregular hours and part year workers should have their holiday pay calculated based on their average earnings over the previous 52 working weeks, and all workers will get a minimum of 5.6 weeks leave. Contracts must be clear on periods of no work no pay, excluding paid annual leave, annualised salary arrangements and statutory leave/sick leave. This does not change the position for part-time workers. Part-time workers who work a full 52 weeks of the year but for less hours or days than their full-time colleagues, can continue to have their holiday calculated pro-rata. It also does not change the position for fixed term employees, whose holiday can continue to be calculated pro-rata for the duration of the contract. There is also currently no automatic application for agency workers, as most are engaged for a specific assignment duration only. However, it could apply in specific industries if long term placements are known to have agreed shutdown/suspension periods EG: Supply Teachers.

The important thing to remember is that paid annual leave is calculated in weeks entitled to, not hours or days, and anyone engaged under a contract of service, or any individual engaged to perform services personally, unless they are providing services to clients or customers of their business or profession, are entitled to it.

The 5.6 weeks calculation is based on 4 weeks EU requirement, and 1.6 weeks UK. Normal remuneration includes salary, commission and bonuses, however the 1.6 weeks UK requirement can be based on just basic pay. Variable pay should be taken as an average over the last 52 weeks.

Why 12.07%? 52 weeks – 5.6 weeks = 46.4 weeks. 5.6/46.4 = 12.07%.

Contractors will be pleased to hear that ‘rolled up holiday pay’ is back, meaning that they can opt for advanced payment on account, usually at 12.07%, as long as it’s genuine, transparent and comprehensible.

Working time regulations 1998 have been amended to adjust the calculation and payment rules for irregular hours and part year workers, for leave years on or after 01^st April. Specific carry-forward rules and limits have been addresses as well as defining what counts as ‘normal remuneration’ and Covid carry forward rules have been repealed.

What else is happening in 2024? Minimum wage increases were put in place from 01^st April. The national living wage now applies to all workers 21 and above and is £11.44ph. There have been changes to Paternity leave, where leave can be taken up to a year post birth (previously 56 days), and can be in non-consecutive 1 week blocks. There is a new day 1 right for flexible working requests (2 per year), and the introduction of the Carers Leave Act 2024. A new employer duty on sexual harassment also looks to take effect from October 2024, which includes PAYE temps.