Many retailers will be taking on temporary staff to cover the busy Christmas period. But do you know how much holiday pay they are entitled to? Laura Morrison of Dentons clears up this complex issue
by Laura Morrison
What are workers entitled to in respect of holidays?
In Great Britain, workers are entitled to a minimum of 5.6 weeks of annual leave. EU law guarantees four of these 5.6 weeks and UK law provides an additional 1.6 weeks.
This additional entitlement is the equivalent of eight days, which is the same number of “public holidays” many employers typically offer.
Despite this, no employee has the right to time off for a public holiday. Whether a worker is able to take the time off depends on their individual contract. Many retailers operate seven days a week and cannot close on public holidays, but they must still offer 5.6 weeks’ holiday in total.
For atypical workers (those who follow a working pattern that differs from the traditional 9am-5pm), employers often calculate holiday entitlement as a percentage of hours worked (typically 12.07%).
However, a recent case has cast doubt on the lawfulness of that practice in some cases.
When can workers take their holidays?
The worker and employer must agree between them when a worker can take holidays. If a retailer engages a worker for a series of short-term assignments, it is unlikely to want them to take a holiday during that time.
In those cases, the retailer can pay the worker in lieu of accrued but untaken holiday at the end of each assignment.
How should employers calculate holiday pay?
The method of calculating holiday pay depends on the type of worker in question. The employer must pay the first four weeks of annual leave at “normal remuneration”.
Normal remuneration takes account of overtime, bonuses, shift allowances etc.
If an employee does not have normal working hours, the employer must calculate a week’s pay based on the average pay over the previous 12-week period.
This will increase to 52 weeks on 6 April 2020. For the other 1.6 weeks, employers have the option to pay at a lower rate, such as basic pay.
That all seems straightforward. When might retailers run into difficulties?
In a recent case, the Court of Appeal examined holiday pay entitlement for someone who had a permanent contract but only worked for part of the year (coining the phrase a “part-year worker”), as well as working part-time hours when she was working.
The employer calculated the employee’s holiday pay entitlement at three times a year and paid her one-third of 12.07% of her earnings on each occasion.
The court found that the UK legislation does not make provision for pro-rating and, as a result, held that part-year workers are entitled to 5.6 weeks’ holiday each year, just like employees who work the full year.
We expect the employer in this case will appeal to the Supreme Court, so watch this space.
What should retailers do if they employ part-year workers?
For retailers, this decision is most likely to affect seasonal workers. If possible, avoid engaging anyone who will not be working for you for the full year on a permanent contract.
Pending any appeal in the recent case, we expect many employers will take a risk-based approach and continue to apply the 12.07% calculation until the outcome of any appeal.
If retailers do not already pay out accrued holiday at the end of each period of casual work, we recommend doing so. This may help to support an argument that each engagement is a separate, short-term contract rather than a permanent arrangement.
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