Employers – do you need to change your employment contracts for part-year/seasonal workers?

If your business engages ‘part-year workers’ on variable hours, you will need to take urgent action to minimise your risk of claims. Part-year workers are workers on permanent contracts with variable hours who do not work some weeks of the leave year.

This is as a result of a recent Supreme Court ruling in an unauthorised deduction from wages claim by a visiting music teacher on a zero-hours contract who only worked for part of the year, where the court found that, instead of multiplying part-year workers’ hours worked by 12.07% to calculate their accrued annual leave days, part-year workers must receive:

• their full 5.6 weeks’ holiday entitlement per year regardless of the number of weeks they work.
• holiday pay based on their average earnings over a legally specified reference period.  This mirrors the legally correct way of calculating holiday pay for any employee or worker whose pay varies from week to week.

The ruling applies to any part-year worker across all sectors. Examples of employers that could be caught by this ruling are those who use permanent term-time workers, seasonal workers, casual workers or zero-hours contractors.

In addition, the correct method of calculation is complex. It involves counting back 52 weeks before the annual leave, discounting any weeks that were not worked and, if necessary, counting back further up to a maximum of 104 weeks to get the 52 weeks before calculating the worker’s average pay over the reference period. There is plenty of scope to get the calculations wrong.

This is a Supreme Court ruling and cannot be appealed. The only means of changing the legal position is intervention by Parliament.  Now is the ideal time to take action to minimise your risk of claims.

What actions can you take as an employer to reduce your risks of claims?

• Conduct a thorough audit to identify any workers or employees who are part-year workers or could be part-year workers on permanent contracts.
• Audit the holiday pay the identified individuals have received from the start of their engagement, calculate what they should have been paid and make arrangements to pay the difference.
• Ensure that part-year workers are given their full 5.6 weeks’ entitlement to annual leave.
• Consider whether you wish to continue using permanent contracts or switch to an alternative arrangement for workers or employees engaged on a part-year basis.

You may benefit from taking advice about what types of arrangements are possible and having fresh contracts professionally drafted to ensure that the new contracts suit your business model, are legally compliant and reduce your risk of claims.

Introducing the new contracts for new staff is not likely to be problematic.  However, if you intend to change the arrangements for any existing part-year employees, it may be necessary to consult with them to get their agreement to make the change and consider dismissal and re-engagement for those who do not agree.

If you continue using part-year workers, you should update your method of calculating the holiday pay to ensure that it is legally compliant.

Identifying atypical workers who might fit into the category of part-year worker and ensuring that their pay is calculated correctly is likely to be more complex than it appears.

How we can help

Should you require assistance with making sure that you have your holiday and holiday pay house in order, please give our People Advisory team a call on 01708 758 958 and they will be happy to support and advise you.