We have extracted the key parts of the government consultation which we are seeking your views on below. If you wish to access the full consultation document please click here.

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* 1. Your Name

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* 2. Job Title

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* 3. Organisation

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* 4. If you employ workers with irregular hours, how do you calculate their holiday entitlement?

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* 5. The Government is considering introducing legislation to allow employers to pro-rate holiday entitlement for part-year workers so that they receive leave in proportion with the total annual hours they work. The simplest way to do this would be to introduce a 52-week holiday entitlement reference period for part-year workers and workers with irregular hours, based on the proportion of time spent working over the previous 52-week period.

The Government proposes that the length of the holiday entitlement reference period should mirror the length of the current holiday pay reference period for consistency. Employers would be required to hold records of time spent working by such workers, similar to the data already required to calculate holiday pay and to comply with the National Minimum Wage Regulations 2015.

Would you agree that the information you currently collect to calculate holiday pay would be sufficient to calculate holiday entitlement using a reference period?

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* 6. Currently in the holiday pay reference period, weeks in which no work is performed are generally excluded, and earlier weeks are brought in to make up the full 52 weeks. This method would cause workers who have weeks where they did not work to have a higher amount of holiday relative to the hours that they work each year. The Supreme Court held that this “Calendar Week Method” was the correct interpretation of the WTR in Harpur Trust v Brazel.

The Government proposes that the weeks in which workers perform no work are included in the holiday entitlement reference period. This would cause the pay and entitlement reference periods to diverge slightly in their operation, but it would more closely align workers’ holiday entitlement with the actual time they spend working.

The Government proposes that statutory annual leave entitlement for part-year workers and workers with irregular hours should be calculated by employers using following two steps:

• Calculate the total hours a worker has worked in the previous 52 weeks (the reference period), including those weeks without work;

• Multiply the total hours worked by 12.07% to give the worker’s total annual statutory holiday entitlement in hours.

Do you agree that including weeks without work in a holiday entitlement reference-period would be the fairest way to calculate holiday entitlement for a worker with irregular hours and part-year workers?

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* 7. There are two options for defining a holiday entitlement reference period.

The first option is to use a rolling reference period. This mirrors the holiday pay reference period; each time a new week is complete, the oldest of the 52 weeks is pushed out of the reference period by the new week of data. This causes slight variations in holiday pay on a week-by-week basis.

The second option is to use a fixed reference period, to calculate holiday entitlement. At the beginning of a new leave year, the worker’s holiday entitlement would be calculated based on previous 52 weeks. This would give a worker a fixed pot of annual leave that they would then be able to draw from throughout the leave year, in line with how the legislation works for workers with regular hours.

Would you agree that a fixed holiday entitlement reference period would make it easier to calculate holiday entitlement for workers with irregular hours?

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* 8. The 52-week holiday entitlement reference period assumes that a worker has been in employment for at least 52 weeks. There would need to be a system for workers in the first 12 months of a job whilst their reference period builds up. Under regulation 15A of the WTR, workers in the first 12 months of a job effectively receive 1/12th of their annual holiday entitlement at the start of each month. This is easy to calculate for workers with fixed hours or working patterns, as their annual holiday entitlement is usually expressed in weeks or days.

A similar approach could be used for workers with irregular hours, although holiday entitlement would need to be calculated at the end of each month based on the actual hours worked in that month to be proportionate to the time worked. This accrual-based system would only be required for the first year of employment until the 52-week entitlement reference period could be used. This can be expressed as a simple calculation:

Hours worked in previous month x 12.07% = monthly statutory entitlement in hours

Employers could use their discretion to allow a worker to take more annual leave than they had accrued in advance.

Do you agree that accruing holiday entitlement at the end of each month based on the hours worked during that month would be the fairest way to calculate holiday entitlement for workers on irregular hours in their first year of employment?

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* 9. If a holiday entitlement reference period is introduced, there must be a way to calculate how much holiday a worker with irregular hours would use to take a particular day off.

The first method is to use the reference period to calculate a flat average working day. When a worker took a day off, they would take off the number of hours calculated from this average working day.

The second method is to use the reference period to calculate the average hours worked for specific days. For example, to work out the amount of holiday it would take to have a Monday off from work, employers would calculate the average hours that a worker worked each Monday in the reference period.

Would you agree that using a flat average working day would make it easier to calculate how much holiday a worker with irregular hours uses when they take a day off?

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* 10. When workers with a contract for services are on assignment, the Government proposes that their holiday entitlement would be calculated in the same way as for other irregular hours workers who are in their first year of work: the employment business or umbrella company would calculate their entitlement as 12.07% of the hours that they had worked over the previous month. As agency workers have the right to take annual leave whilst on assignment, they could take their accrued annual leave and be paid for it, rather than receiving holiday pay as payment in lieu at the end of their assignment. For shorter assignments, agency workers may prefer to take their annual leave at the end of their assignment or receive holiday pay in lieu when their assignment comes to an end. In either case, they would receive holiday entitlement and the respective holiday pay which is directly proportionate to the hours they have worked.

When workers with a contract for services are not on assignment, the Government proposes that they would not accrue holiday entitlement as they are not working.

Would you agree that calculating agency workers’ holiday entitlement as 12.07% of their hours worked at the end of each month whilst on assignment would make it easier to calculate their holiday entitlement and holiday pay?

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* 11. Do you have any further comments about calculating holiday entitlement for agency workers?

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