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20 March 2018

Calculating holiday pay: the saga continues

Working out holiday pay continues to be less than straightforward and the recent Employment Appeal Tribunal (EAT) decision in Brazel v Harpur Trust looks at how this should be calculated for those with irregular hours.  It has been long considered that the correct way of calculating holiday pay is to apply the percentage 12.07% to the amount the worker has earned so that this is calculated on an annualised basis consistent the entitlement of full-time workers to 5.6 weeks holiday per year.  This is also the method suggested in ACAS guidance.  However, the EAT has held this is incorrect and that workers with irregular hours should have their holiday pay calculated by reference to the previous 12 weeks earnings. 

This means that in some cases a part-time worker who does not work the whole year will receive more holiday pay than a full time worker.  The EAT held there is nothing to prevent part-timers being treated more favourably than full timers and that there is no justification for capping holiday pay at 12.07% for those working on a part-time basis. 

This decision will directly affect any business employing casual or zero hours workers working irregular hours, term-time only workers in educational establishments and those who are paid rolled-up holiday pay.  Although the sums involved are likely to be small for the particular individual, when applied across an organisation these can add up to a significant amount. 

Employers who are affected by this need to consider what to do going forward and should consider taking advice on their particular circumstances.