BEIS Consultation on Holiday Entitlement: What you need to know

Why is this consultation happening? 

Last month the Department for Business Energy and Industrial Strategy (BEIS) announced a consultation on calculating holiday entitlement for part-year and irregular hours workers, following ongoing campaigning by the REC. Reviewing holiday entitlement for these workers has been a key priority for the REC, following the Harpur Trust v Brazel case in the Supreme Court last year. The judgement in this case ruled that the 12.07% accrual rate that had been used previously was no longer applicable. You can read more about the outcome of the case on our legal insights page. 

REC initial response to BEIS 

The REC will be responding formally to this consultation (which closes on the 9th March) on behalf of the industry. However, we have also been having additional conversations with BEIS and our members on this issue. In those conversations, we have reiterated the need for new legislation and guidance to be introduced on holiday entitlement that is suitable for all classes of workers. This is of particular importance as the consultation document refers to "workers on permanent contracts". Although this was the terminology used in the Harpur Trust judgment, "permanent contract" is not a legally defined term. It is therefore unclear exactly what classes of workers would fall within the scope of this.       

We have made it clear that legislation or guidance needs to avoid this ambiguity by explicitly making the distinction between contracts of employment or contracts for services, or by using the existing definition of worker as per the Working Time Regulations. REC has raised the need for new legislation to address this confusion and will reiterate this point in our written submission as well. BEIS have agreed that this is a key outcome from this consultation and were grateful to the REC for making them aware of this important distinction.

This consultation provides an opportunity to get much needed clarity around holiday pay entitlement and it's important our members engage with it, either directly or via the REC. The ruling in the Harpur Trust judgment has removed much of the understanding that workers and employers had around how to calculate holiday entitlement. Government guidance prior to the case has been updated to remove the previously accepted 12.07% calculation, but no new guidance has been introduced to replace this. Employers and workers are left with no clear method to fairly and accurately calculate holiday pay. BEIS recognises the need for clarity moving forward, and addressing this grey area is a key priority for them. 

Members who are keen to have their views represented can submit their own responses to BEIS, or email patrick.milnes@rec.uk.com to feed into the REC's submission.