We have previously reported on the Harpur Trust vs Brazel ruling from the Supreme Court and the implications it has for home care providers who employ staff on zero hours or contracts with irregular hours.
The ruling has implications in the way holiday entitlement is calculated. Prior to the ruling leave was generally calculated using the Accruel System where workers would accrue 12.07% hours of leave for every hour worked. The percentage comes from 52 weeks in a year, or 260 weekdays. If we take out the statutory annual leave entitlement of 28 days we get 232 working days, and 28 is 12.07% of 232.
Holiday pay was calculated using one of two methods:
- Employee’s hourly rate
Each hour of leave is paid at the employee’s hourly rate. - The Calendar Week Method or 52-weeks Method
An average hourly rate is calculated using a reference period of 12 weeks, amended to 52 weeks from 6 April 2020.
It’s useful to remember that only weeks in which remuneration has been received are to be included in the reference period. Statutory payments, like for example sick-pay or maternity leave, do not constitute remuneration, but leave pay does!
Since the Supreme Court ruling (where a teacher was moved over from the Calendar Week Method to the Percentage Method so was payed only her accrued hours at her hourly rate) employers must now pay 28 days of paid annual leave irrespective of the number of hours an employee has worked. Note that this does not mean employers are necessarily having to pay 100% of wages for each of those 28 days, instead the pay owed is calculated using the Calendar Week Method so is proportionate to the time worked and amount paid previously.
What are carers entitled to?
Assuming carers are employed on a continuous zero-hours contract they are entitled to 28 days of paid leave per leave year. There is no more accruel.
The employer can allow employees to take leave in hours, but how to translate those hours into 28 days must be clearly defined in their contract. We, as CareLineLive, have decided that in our platform we will only allow carers to take holiday in days or half-days. Pay is calculated using the Calendar Weeks Method. Once we know the average weekly pay, we can easily calculate the average daily pay.
Part time employees are treated slightly differently.
In very simple terms, a part-time employee is one that still works regular hours, that is the same number of hours a week or maybe fortnight, but not the same amount as a full-time employee. Their entitlement is pro-rated depending on their Full Time Equivalent coefficient.
For employees who started work in the middle of a leave year the legislation says that they are entitled to a proportion of their entitlement, depending on how many months of employment fall within that leave year. Watch the video for some examples.
Similarly employees leaving in the middle of a leave year are only entitled to a proportion of their entitlement. But this time it depends on the number of days, and not months, of employment.
The difference in treatment comes from the fact the employers can, if they choose to, award one twelfth of the employee’s entitlement every month in the first year of employment.
If someone both starts and leaves in the same leave year they are again entitled to only a proportion of their entitlement, and, as for employees leaving in the middle of a leave year, it depends on the number of days of employment.
Note that these special cases are all about the entitlement, and not pay. That is still to be calculated with Calendar Week Method, apart from part-time. Part-time employees are most likely still paid a monthly salary and that salary includes the leave pay, and therefore, no calculation is necessary.
Confused?
We have presented a webinar on the topic – you can see the slide deck here and watch the webinar here. This includes a number of worked examples which help to clarify different scenarios.
There are further scenarios below.
Comparing the new way with the old
The Q&A time of our webinar showed that people were still quite confused with some perceiving the different calculation regimes to end up with the same amounts, or vastly unfair to carers or agencies. For clarification we have worked through two scenarios below and applied the three pay regimes to each.
Scenario 1 – Samantha
Samantha starts working on March 17th, 2020, on a zero-hours contract. Her hourly rate is £12.00. The company’s leave year is from January 1st to December 31st.
During March, April and May she works 1 hour a week. She then takes 2 weeks holiday at the beginning of June.
For the rest of June and from July throughout to November she works 2 hours a week. She finally takes the rest of her paid annual leave at the beginning of December.
Samantha – New regime after the UKSC judgments
In 2020, she is entitled to 23.5 days of paid annual leave.
For the 2 weeks of paid annual leave in June, the average weekly pay for the previous 10 weeks is £12.00, so she will be paid £24.00.
For the rest of her paid annual leave in December, which is 23.5 – 14 = 9.5 days, the average weekly pay for the previous 36 weeks is (£12.00 * 10wks + £24.00 + £24 * 24wks) / 36wks = £20.00, so she will be paid (£20.00 / 7) * 9.5 = £27.15 (rounded up)
In 2020 Samantha received £51.15 in leave pay.
Samantha – Accruing leave at 12.07% and pay using the Calendar Week Method
Since the leave is accrued in hours, we cannot really use the Calendar Week Method. What we can do is calculate the total pay for the previous 52 weeks and from that calculate the average hourly rate in those 52 weeks. Note that, since paid received as part of annual leave should be considered in the Calendar Week Method, the average hourly rate may differ from the contracted hourly rate.
For the 2 weeks of paid annual leave in June she has accrued (1hr * 10wks) * 12.07% = 1.207 hours. The total pay for the previous 10 weeks is £120.00. As she has worked 10 hours in those 10 weeks, the average hourly pay is £120.00 / 10 = £12.00 (This is a simple case and it’s easy to see that the average hourly rate is £12.00, but in general that’s how you can calculate the average hourly pay). So, she will be paid £12.00 * 1.207 = £14.49 (rounded up)
For the rest of her paid annual leave in December she has accrued (1hr * 10wks + 2hr * 24 wks) * 12.07% = 7.0006 hours. The total pay for the previous 36 weeks is (£12.00 * 10wks + £14.49 + £24.00 * 24wks) = £710.49. As she has worked 58 hours in those 36 weeks, the average hourly pay is £12.249827. So, she will be paid £12.249827 * (7.0006 – 1.207) = £70.98 (rounded up).
In 2020 Samantha received £85.47 in leave pay.
Samantha – Accruing leave at 12.07% and pay using contracted hourly rate
For the 2 weeks of paid annual leave in June she has accrued (1hr * 10wks) * 12.07% = 1.207 hours, so she will be paid £12.00 * 1.207 = £14.49.
For the rest of her paid annual leave in December she has accrued (1hr * 10wks + 2hr * 24 wks) * 12.07% = 7.0006 hours, so she will be paid £12.00 * (7.0006 – 1.207) = £69.53 (rounded up).
In 2020 Samantha received £84.02 in leave pay.
So in summary Samantha’s leave pay under the three regimes is as follows:
- New regime – £51.15 in leave pay
- Accrued leave at 12.07% and pay using the Calendar Week method – £85.47 in leave pay
- Accrued leave at 12.07% and pay using the contracted hourly rate – £84.02 in leave pay
Scenario 2 – George
George starts working on March 17th, 2020, on a zero-hours contract. His hourly rate is £12.00. The company’s leave year is from January 1st to December 31st.
During March, April and May he works 15 hours a week. He then takes 2 weeks holiday at the beginning of June.
For the rest of June and from July throughout to November he works 30 hours a week. He finally takes the rest of his holiday at the beginning of December.
George – New regime after the UKSC judgments
In 2020, he is entitled to 23.5 days of paid annual leave.
For the 2 weeks of paid annual leave in June, the average weekly pay for the previous 10 weeks is £180.00, so he will be paid £360.00.
For the rest of his paid annual leave in December, which is 23.5 – 14 = 9.5 days, the average weekly pay for the previous 36 weeks is (£180.00 * 10wks + £360.00 + £360* 24wks) / 36wks = £300.00, so he will be paid (£300.00 / 7) * 9.5 = £407.15 (rounded up)
In 2020 George received £767.15 in leave pay.
George – Accruing leave at 12.07% and pay using the Calendar Week Method
For the 2 weeks of paid annual leave in June he has accrued (15hr * 10wks) * 12.07% = 18.105 hours. Note that as working week of 15 hrs a week, this corresponds to 1.207 weeks, so all if the accrued leave will have to be paid for those two weeks.
The total pay for the previous 10 weeks is £1,800.00. As he has worked 150 hours in those 10 weeks, the average hourly pay is £1,800.00 / 150 = £12.00. So, he will be paid £12.00 * 18.105 = £217.26.
For the rest of his paid annual leave in December he has accrued (15hr * 10wks + 30hr * 24 wks) * 12.07% = 105.009 hours. which means he has 105.009 hours, which means he have 105.009 – 18.105 = 86.904 hours left to take. Considering an average week of (15hr * 10wks + 30hr * 24 wks) / (34 wks) = 25.58823 hours per week, this corresponds to 3.3962 weeks.
Although George may have wanted to go on leave for only two weeks, employees are encouraged to take all their leave, rather than have it paid in lieu. Therefore, he decides to take it all now.
The total pay for the previous 36 weeks is (£180.00 * 10wks + £217.26+ £360.00 * 24wks) = £10,657.26. As he has worked 870 hours in those 36 weeks, the average hourly pay is £12.24972. So, he will be paid £12. 24972* 86.904 = £1,064.56 (rounded up).
In 2020 George received £1,335.82 in leave pay.
George – Accruing leave at 12.07% and pay using contracted hourly rate
For the 2 weeks of paid annual leave in June he has accrued (15hr * 10wks) * 12.07% = 18.105 hours, so he will be paid £12.00 * 18.105 = £217.26.
For the rest of his paid annual leave in December he has accrued (15hr * 10wks + 30hr * 24 wks) * 12.07% = 105.009 hours.
Similarly to above, George has 3.3962 weeks left to take and decided to take them all now. So he will be paid £12.00 * 86.904 = £1,042.85 (rounded up).
In 2020 George received £1,260.11 in leave pay.
George’s leave pay under the three regimes is as follows:
- New regime – £767.15 in leave pay
- Accrued leave at 12.07% and pay using the Calendar Week method – £1,335.82 in leave pay
- Accrued leave at 12.07% and pay using the contracted hourly rate – £1,260.11 in leave pay
The slide deck from our webinar is below:
We anticipate that there will be a grace period for employers to get their systems and payments in line with the new regulations. At CareLineLive we will keep abreast of what the consensus becomes on this issue and will make suitable changes to our holiday leave calculations at the appropriate time.
If you would like to learn more about CareLineLive please get in touch.
