Annual leave and holiday pay forms a core element of an organisation’s rewards structures. We all deserve a break now and then and understanding the holiday entitlement for part time and full time workers whilst sustaining our earnings is so vital to the ongoing wellbeing of employees.
Now, a new supreme court ruling looks set to affect the way businesses handle holiday pay significantly. A Government announcement has set out changes to holiday pay legislation for all organisations.
The new ruling has found that part time employees should be entitled to the same amount of annual paid leave as their full time colleagues and could see part time teachers and workers on similar contracts receive thousands in back pay.
How does this new ruling affect you? With these latest changes to holiday pay, compliance and adherence to the new legislation will be more important than ever, especially if businesses wish to avoid hefty potential financial and legal consequences.
In this blog we will look at:
- The new ruling and what it means for your people.
- What is the holiday entitlement for part time workers?
- What are prorated holidays?
- How are businesses handling the latest legislation update?
What is the Holiday Pay Legislation Update 2022?
In an unprecedented change to term time holiday pay allowances, the latest supreme court ruling has judged that employees on part time or no fixed contract should be entitled to the same amount of annual leave as their full time colleagues.
The case was precipitated by Lesley Brazel, a music teacher on a continuous but part time contract. Judges ruling in the case were asked to consider whether Ms Brazel was entitled to the same 5.6 weeks as her full time colleagues.
The ruling has found that Ms Brazel along with other workers on part time contracts are now entitled to the full entitlement of annual leave afforded their colleagues. For businesses this will now necessitate an examination of how they handle holiday pay as the new legislation could lead to potential accusations of underpay, not to mention the possibility of backpay.
What is the holiday entitlement for part time workers?
So what is the working part time holiday entitlement for part time workers?
The statutory annual leave regulations currently offer 28 days pay of annual leave for employees who work at least 5 days a week. This equates to roughly 5.6 weeks of annual leave per annum.
Annual leave for part time workers prior to the ruling also offered 5.6 weeks of annual leave but in reality, this would equate to fewer than 28 days of leave per year as it was based upon hours worked.
For example: if they work 3 days a week, they must get at least 16.8 days’ leave a year (3 × 5.6).
Workers on irregular hours are entitled to a leave allowance based upon every hour they work. The allowance is usually calculated in house by their employer but a guide to calculating holiday statements is available.
Employers should also be mindful that bank holidays and other public holidays are separate to this statutory allowance and form a separate component of annual leave structures.
What are prorated holidays?
Pro-rated holidays are leave allowances which are proportionate to the leave entitlement offered to full time employees. A common example of a prorated allowance would be the Acas term time holiday entitlement which protects the 5.6 week statutory minimum allowance for term time workers.
The proportion of holiday leave entitled to an employee on a prorated rate is calculated on the basis of hours worked. For example, employees who work half the hours of their full time colleagues will be entitled to half of the leave allowance.
For businesses, calculating prorated pay offers a significant degree of complexity. For their full time salaried employees, the rates tend to be self explanatory, whereas for pro-rated staff, there are a number of factors which can skew calculations.
The simplest formula is to take the proportion of a full working week which the employee works and then multiplying it by the amount of holiday leave a full time employee is entitled to. This should offer a rough guideline for your prorated allowances. Advanced Payroll can work out prorated holidays.
How is your business handling the Holiday Pay Legislation Update 2022?
The most obvious question for businesses moving forwards is how will they be able to pivot to meet the challenges of the new legislation?
Failure to adhere to the new ruling and to ensure compliance in their holiday pay allowances could open organisations up to a host of legal and financial challenges which they will undoubtedly be keen to avoid.
Fortunately, the answer to continued accuracy and compliance lies in the systems and technology which businesses rely upon already for their daily operations. It’s a somewhat obvious point to make that your payroll solutions have a part to play in ensuring accuracy with the new holiday pay legislation but what about the other areas of your people management function? What about the way you schedule and record hours work, how can increased automation of these processes provide greater payroll accuracy?
Fundamentally, we believe in time and attendance as a positive force across all organisations. Your people deserve to have well-earned holiday entitlement and annual leave for their hard work and a business which places pay at the heart of what they do will inevitably find they have a happier, more contented workforce- elements which all reflect positively upon your brand, particularly from the perspective of potential new hires.
To find out more about how Advanced Time and Attendance Software can transform the way you meet the demands of new legislation. With our Auto-Rostering add-on, you can easily conduct rota management when dealing with annual leave and ensure you have the best workforce available.
Ensure accuracy and compliance throughout the next financial year and beyond, get in touch with one of our friendly team members today.