Holiday Entitlement Calculations: A Holiday From Hell For Businesses? 

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Holiday Entitlement Calculations: A Holiday From Hell For Businesses?

Key Contact: Claire Knowles

Author: Adam McGlynn

Find out more with a free webinar from Acuity Law.

When the Supreme Court last year agreed with a part-year music teacher that her employer should have based her holiday pay based on a calendar “reference” period (and not the hours she actually worked) it underscored a situation that might oblige many business leaders to take a holiday – after they’ve got their heads around it.

The decision in Harpur Trust v Brazel means that businesses could be hit by claims for several times the holiday pay for casual workers than they might expect and, arguably, several times the holiday pay that would be fair.

Prior to the ruling, ACAS and many other authorities claimed in their guidance that holiday pay calculations could be simplified by using the “percentage method” – multiplying an employee’s earnings by 12.07%.

But the UK’s “Working Time Regulations” (WTR) states that a worker’s holiday leave entitlement continues to accrue for the duration of the contract, regardless of whether work is actually performed.

In its application of the Regulations, the ruling puts a spotlight on what many believe is an error in parliamentary drafting. Crucially, for businesses, it means that the percentage method is unreliable for calculating the entitlement of casual workers who are engaged for only part of the year, because it could award them substantially less pay than they are entitled to.

“The UK has taken a different approach to other EU member states in terms of how you calculate holiday pay. It doesn’t seem like the consequences of that approach were intentional, and it went below the radar for several years until the Supreme Court in Harpur Trust v Brazel exposed it.” explains Acuity Law’s Adam McGlynn.

“The consequence of miscalculated holiday pay is that employers won’t pay enough and employees could bring claims for the outstanding amount.”

Parliament has begun a consultation process on the law, however, it is expected to take some time before change is affected.

But, says McGlynn: “The more publicity the ruling garners, the more jeopardy there is for businesses in the meantime.”

That’s why Acuity Law is offering a free webinar on the highly misunderstood topic of holiday pay and annual leave calculations. The session, held at 11am on Thursday 13th April, helps employers:

  • Understand the basics of holiday entitlement
  • Avoid the exacerbated liability following the Harpur Trust v Brazel ruling
  • Implement simple fixes to avoid these liabilities
  • Take swift remedial action if they discover they have fallen foul of the rules.

Host Adam McGlynn was joined by Nadra Ahmed CBE, Chairman of the National Care Association.

Watch our free webinar here.

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For any queries, please contact a member of the Employment team.

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