New holiday rules that apply to part-year and irregular hours workers

The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (the Regulations), which were published at the end of last year, make a number of changes to the Working Time Regulations. The key change that is likely to be relevant to schools is the introduction of two new types of worker – “irregular hours” workers and “part-year” workers. Find out about the new holiday rules that apply to part-year and irregular hours workers.

A reversal of the Harpur Trust decision

This change follows the Supreme Court’s decision in 2022 in the case of Harpur Trust v Brazel. This ruling had the effect that all workers, regardless of how many hours they worked over the year, were entitled to 5.6 weeks of holiday per year. The Harpur Trust judgment made it explicitly clear that this entitlement could not be pro-rated and it rendered unlawful the previously commonplace method of using a 12.07% multiplier to calculate holiday for atypical workers. The judgment produced some fairly absurd results, with invigilators and sports coaches who were employed by schools for just a couple of weeks a year gaining an entitlement to be paid for 5.6 weeks of holiday per year.  

The new Regulations reverse the Harpur Trust decision and impose a statutory framework for calculating holiday for part-year and irregular hours workers.

Under the Regulations, the term “part-year worker” applies to workers who are employed to work for part of each year, with periods of at least one week per year when they are not required to work and for which they are not paid. For example, this would cover a school’s term-time only staff.  

The term “irregular hours worker” applies to those workers whose hours of work wholly or mostly vary in each pay period, and would include, for example, employees on zero hours contracts.

The new Regulations will now see holiday for irregular hours and part-year workers accruing at the end of each pay period at the rate of 12.07% of the number of hours that they have worked during that pay period, subject to an annual cap of 28 days.

Rolled up holiday pay

The practice of “rolling up” holiday pay involves spreading accrued holiday pay over the course of the year by paying it monthly in addition to an employee’s hourly rate, as opposed to requiring an employee to take their holiday. This practice had previously been ruled unlawful, as it was considered unfair to prevent a worker from taking their holiday. However, the Regulations will in future permit the practice of rolling up holiday pay for part-year and irregular hours workers. This will be welcome news for many schools.

This means that an employer wishing to roll up holiday pay for part-year or irregular hours workers may now do so by uplifting the salary of such workers by 12.07% and paying this to them at the same time as their basic salary. Employers wishing to take advantage of this reinstated right should ensure that each affected employee’s pay slip clearly separates out the basic salary payment from the 12.07% uplift. It must be clear that the uplift relates to holiday pay and the period to which it relates.

When this comes into effect

Whilst the Regulations came into effect on 1 January 2024, the provisions relating to the use of the 12.07% multiplier for calculating holiday pay will come into effect at the start of the first school holiday year to begin on or after 1 April 2024. As the school holiday year generally runs from 1 September to 31 August, for most schools this change will come into effect from 1 September 2024.  

Until that time, all part-year and irregular hours workers remain entitled to 5.6 weeks’ holiday per year, in accordance with the Harpur Trust judgment.

What do schools need to do?

Schools will need to ensure that their employment contracts are compliant with this new legislation when looking at the new holiday rules that apply to part-year and irregular hours workers. For new starters, this should be straightforward. However, schools will need to review the contractual provisions relating to holiday arrangements for existing members of staff who are part-year and irregular hours workers. If amendments were made following the Harpur Trust judgment and a proposal is put forward to revert to rolled up holiday pay (or to start using it), this is likely to be a contractual change and affected staff would then need to be consulted on the proposal. We would be happy to advise schools on their strategy and the available options.  

Schools will need to ensure that part-year and irregular hours workers are paid in accordance with the new Regulations. For part-year workers who are paid a fixed annual salary which is inclusive of holiday pay, there is unlikely to be any need to change holiday pay. However, for any part-year workers or irregular hours workers who are paid on an hourly basis, schools should check that they are complying with the requirement to pay all accrued hours of holiday at the correct rate. The Regulations make clear that, when determining the rate at which holiday should be paid, employers need to ensure that they take into account overtime payments that have been regularly paid over the previous 52 weeks, any commission payments and any additional payments relating to length of service, seniority or qualification.  

How can Moore Barlow help with the new holiday rules that apply to part-year and irregular hours workers

We are trusted legal advisers to senior leaders and governors of leading independent schools of all shapes and sizes, providing advice and support on all the key legal and strategic issues arising from normal operations and plans for future development and expansion.

We are on hand to advise you on all matters relating to these new Regulations and help you plan in the new holiday rules that apply to part-year and irregular hours workers. Do get in touch with our Independent School if you would like our support.