At long last the holiday calculations for zero hour and part-year workers has been resolved.
What is the history?
If you have been reading our blogs, heard Jemma speak in one of her many Employment Law talks or have been following Employment Law in general you are probably aware of a case called Brazel v Harper Trust which sent employers and HR Professionals across the UK into a spin.
We all knew that the Harper Trust rule didn’t make sense and meant that those staff on zero-hour contracts and part-year workers would end with more holiday than permanent staff and it was a pain to calculate.
Thankfully, a significant recent development is an alteration in the method of calculating holiday pay for part-year workers, reverting back to the 12.07% system. This change, while seemingly straightforward, has implications for both employers and employees in the part-year sector.
What is the 12.07% rule?
The 12.07% rule is a method to calculate holiday pay for part-year workers, typically those on zero-hour or irregular contracts. It’s based on the principle that these workers, on average, work 46.4 weeks per year (52 weeks minus 5.6 weeks of statutory holiday). Therefore, their holiday pay is calculated as 12.07% of their total earnings (5.6 weeks divided by 46.4 weeks).
What industries and workers are likely to be impacted?
Businesses which often you part-year workers include Early years education, Hospitality, Leisure, and Care.
When does this change take place?
The change back to the 12.07% rule will vary between employers. The change will take place at the beginning of the employers’ holiday year following April 2024. This means if you have a holiday year of January the change will not take place until January 2025. Our top tip for employers who might be struggling with this is to change your holiday year to April to March, by doing this the change will come into effect in April 2024.
Implications for Employers
Employers will need to adjust their payroll systems and policies to align with this change once it comes into effect. It’s crucial to ensure accurate and compliant calculations of holiday pay. Employers should also be aware of the potential financial implications, as this might alter the holiday pay entitlement for some employees, leading to adjustments in budget allocations.
Impact on Employees
For part-year workers, this change provides a more predictable and transparent method for calculating their holiday entitlement. It ensures that they receive a fair proportion of holiday pay relative to their working hours. Employees should review their pay slips and speak with their employers if they have questions about how their holiday pay is calculated.
Best Practices for Implementation
1. Review and update payroll systems to ensure they are set up to calculate holiday pay at 12.07% for part-year workers.
2. Communicate the changes to all affected employees, explaining how their holiday pay will be calculated when the change takes place.
3. Train HR and payroll staff on the new calculations to ensure compliance and readiness to answer any queries from employees.
4. Document the changes in company policies and employee handbooks.
The return to the 12.07% method for calculating holiday pay for part-year workers marks a significant step in simplifying employment law compliance for businesses. By understanding and implementing these changes effectively, employers can ensure fair and lawful treatment of their part-year workforce, maintaining compliance and fostering a transparent working environment.
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