How Is the Reference Period for Holiday Pay Calculations Changing?

Currently, when employers calculate holiday pay for those staff without fixed working hours, for example casual workers, the current reference period is the last 12 worked weeks.

From 6 April 2020, the holiday pay reference period is increasing so that the last 52 worked weeks will need to be taken into account, for those staff who have at least 52 weeks continuous service.

How Will 52 Week Reference Period Operate?

The new 52 week reference period will operate in a similar way to the current 12 week period:

• employers will need to look back across the last 52 weeks that the staff member has actually worked (but does not need to look back further than 104 weeks from the date of calculation)
• weeks in which no pay was received will not be counted
• where there are fewer than 52 worked weeks to take into account, the reference period is reduced to the lower number of weeks worked
• paid overtime  (if contractually obliged or voluntary but sufficiently regular and considered to be normal pay) worked during the reference period must also be included in the calculation

The 52 week reference period will doubtless provide a more accurate calculation for holiday pay as it will be less exposed to short term variations in pay. 

Please note however that this change does not resolve the issues being considered in the case of The Harpur Trust v Brazel, namely whether holiday pay and leave may be pro-rated for staff who only work part of the year. We have reported on this case in our article, 'Court of Appeal Determines How to Calculate Holiday for 'Part Year' Workers'. We await the Supreme Court's decisions as to whether the The Harpur Trust is granted leave to appeal.

If you would like further information in respect of the above or would like us to review your existing practices in relation to the calculation of holiday pay more widely, contact Kathy Halliday in our Employment Law team on 0121 227 3711, or complete the form below.