Employers are stuck in a Catch-22 situation over holiday pay for casual or seasonal staff, as the fallout from a landmark legal ruling continues.
Some may be at risk of compensation claims if they are found not to be giving workers enough paid leave.
But they have to balance that against a major unknown in what changes the UK Government could make to employment law following a recent consultation.
The dilemma facing businesses has emerged in the wake of a Supreme Court ruling that employees are entitled to 5.6 weeks of paid leave annually - irrespective of how much of the year they work.
The case confirmed that Working Time Regulations do not provide a specific framework for calculating leave entitlement for the likes of term-time, seasonal or casual workers - and that they should not receive a reduced amount of holiday entitlement.
This is an issue which a great number of Scottish employers need to have on their radar. It’s complex, but significant.
Off the back of this judgement, many employers were faced with contemplating how to change the way they deal with holiday entitlement and pay for those who only work part of the year.
But, in January, the government launched a consultation to understand the implications of the case and consider whether any changes to the law are needed.
The challenge for employers is whether they take steps now to ensure they are operating legally in the light of the Harpur Trust case when there’s a possibility the law will change again.
The alternative is to hold off from making changes and seeing what proposals emerge, but running the risk of claims for underpaid holiday pay in the meantime - it’s a situation which requires careful consideration.
The Harpur Trust case involved the question of how holiday entitlement and pay is calculated for workers who only work for part of the year.
If a worker only works for part of the working week, their holiday entitlement is calculated on a pro-rata basis to reflect that
It had previously been thought that the same principle would apply to those who only worked for part of the year. But that was dismissed as part of last year’s Harpur Trust ruling and the 5.6-week judgement.
This can result in part-year workers receiving proportionately more paid holiday than those who work the year round.
The other aspect is that, for those who work irregular hours or on a casual basis, many employers have historically paid them holiday pay calculated on the basis of 12.07% of the hours they’ve worked.
The Harpur Trust case emphasised that this method is not compliant with Working Time Regulations and is likely to result in an underpayment of holiday pay.
The UK Government consultation ended on 9 March. The timetable for how responses to this will be considered is not yet known.
Even if that leads to proposed legislative changes, there are questions over when they could come into action.
Would it be given sufficient time to go through Parliament given that we have a General Election looming and that there are already a number of other proposed changes to employment law waiting to be progressed?
The Harpur Trust case was brought by an employee who was on a zero-hour permanent contract who only worked during term time and was paid for the actual hours she worked. She did not work a full week and did not work for parts of the year due to school holidays.
Daniel Gorry is a Glasgow-based director in the employment law team at Lindsays
