| HR & EMPLOYMENT LAW
Jackie Le Poidevin, Editor-in-Chief, HR Adviser |
Part-year Workers’ Holiday Entitlement Consultation: a Missed Opportunity?
The government has launched a consultation on changing the method used to calculate holiday entitlement for part-year and casual workers. This aims to overcome the problems caused by last year’s Harpur Trust ruling by permitting employers to pro-rate these workers’ entitlement so it’s proportionate to the time they spend working. Read on to discover what the proposals say (and don’t say), how they could affect your organisation and what you should do now.
What’s the Problem?
In Harpur Trust v Brazel [2022] UKSC 21, the Supreme Court held that all permanent workers must receive 5.6 weeks’ paid holiday a year, even if they only work for part of the year. The government estimates that 320,000 to 500,000 permanent term-time and zero-hours workers are entitled to additional holiday following this decision. Approximately 37% of these are workers in the education sector, such as teaching assistants on term-time-only contracts.
What’s the Government’s Solution?
The government is proposing that to calculate holiday entitlement for part-year and irregular-hours workers, you will:
- Add up the total hours the person has worked in the previous 52 weeks, including weeks when they didn’t work.
- Multiply the total hours worked by 12.07% to give their annual statutory entitlement in hours.
You would perform this calculation once at the start of each holiday year, except in the first year of employment when holiday would accrue each month.
Why Does this Sound Strangely Familiar?
Although it was never set out in legislation, the 12.07% method was previously endorsed by Acas and the government. This is the proportion of the working year that a full-time, full-year employee can take as holiday. The Supreme Court said applying this calculation to part-year workers resulted in a holiday shortfall for them but the government now wants to reinstate it and it put it on a legal footing.
A 52-week reference period is already used to calculate holiday pay for workers with variable hours or pay rates. However, when doing this, you have to exclude any weeks when the person did no work. You also have to perform the calculation every time holiday is taken, not just once a year. The consultation document doesn’t suggest this requirement will change: the proposals only apply to calculating holiday entitlement.
What Do these Proposals Mean for My Business?
This approach should:
1. Simplify Holiday Entitlement – But Not Holiday Pay – Calculations
As the proposals stand, they do nothing to ease the burden of calculating variable-hours workers’ holiday pay. Also, although there are proposals for working out how much holiday to deduct when variable-hours workers take a day’s leave, the government itself acknowledges there are problems with these.
Many employers may feel an easier and fairer approach would be to:
- Allow workers with irregular hours to nominate days on which they wish to take holiday and how many hours they want to take on that day.
- Pay them for these at their usual hourly rate and deduct them from their entitlement.
2. Be Beneficial for Workplace Relations
Although part-year workers may feel disappointed, the proposals, if implemented, will restore a sense of fairness by removing their holiday ‘windfall’. In particular, the Supreme Court’s decision means that a part-time, full-year worker who works the same number of hours across the year as a part-year worker receives less holiday than them.
3. Save You Some Money
Part-year workers’ holiday entitlement (and therefore holiday pay) will reduce, although the government acknowledges this won’t usually be a significant amount per worker.
What Should We Do Now?
If you’ve been affected by the Supreme Court’s decision, you should:
- Take part in the consultation exercise. You need to respond by 9 March.
- Keep following the approach set out in The Harpur Trust for now when calculating part-year workers’ holiday entitlement, as the amended rules won’t apply retrospectively.
There will be a more detailed report on the proposals in the March issue of HR Adviser.
| HEALTH & SAFETY
Michael Ellerby, Editorial Board Member, Health & Safety Adviser and Risk Assessment & Compliance |
Check Your Fire Compartments to Prevent Rapid Spread of Catastrophic Fire
Compartmentation is a simple way to reduce the risks from fire and smoke spreading within your premises. When done well, it is effective all of the time. Unfortunately, simple methods of defeating the compartmentation (such as wedging a fire door open) undo all of the benefits. While we should, of course, take every effort to prevent a fire, some simple steps can be taken to reduce the spread of fire.
Understand Your Fire Compartments
Take a little time and get a sound understanding of where the fire compartments are in your premises. This may involve looking at plans or walking around and checking your structures. In an ideal world, you will have a plan identifying your fire walls, fire doors, etc. If not, take simple steps to start creating your own; this is quite easy in simple premises but may need a professional input in more complex ones.
Check the Integrity of the Compartments
Fire compartments only work if they are intact! Look for some of the common ways that they can be compromised and take simple steps to overcome the problems:
- Fire doors being wedged open or otherwise obstructed.
- Fire doors that do not close properly even when not wedged (the doors do not close properly due to poor fitting, damaged closers, etc.).
- Holes cut through the fire walls (such as for new cable runs for power or for data).
- Fire stopping that has been damaged (knocked about or even removed).
Fire Door Checks
These should form part of your regular fire safety checks. This has been in the headlines recently with new requirements under the Fire Safety (England) Regulations 2022. These regulations apply to all buildings in England that comprise two or more domestic premises (including the residential parts of mixed-use buildings). There are additional requirements for buildings over 11m tall.
Check What is Happening Above Your False Ceiling
All too often, I have seen fire doors installed in poor locations, where the area above the doors is compromised or even missing. Suspended ceilings have many advantages but they can hide problems from the unwary. If a wall runs up to the suspended ceiling, it does not necessarily follow that the wall continues up to the floor above. There may be a gap or opening that may allow fire and smoke to pass horizontally from one (supposed) compartment into another. This may lead to unexpected and rapid spread of fire.
Look above your suspended ceilings but be mindful of how you access these areas (work at height is another set of risks) and be aware of what else may be above such ceilings. Give consideration to the risks from glass fibre insulation and also from asbestos that may be present in older premises.
Glazing
Glazed panels can offer a useful view but may also compromise your fire safety compartmentation. If you need to have vision panels in walls, consider the use of appropriate fire safety glazing, such as Georgian wired glass or Pyro Glazing, if the panel is in the wall of a fire compartment.
Regular Checks
Carry out regular checks around the premises and address faults and defects as soon as they are seen. Do not leave it to chance. Be proactive:
- Maintain the premises in good order.
- Fix damaged and defective fire doors.
- Remind staff not to wedge or obstruct fire doors.
- Encourage good practices, such as closing doors (even if they are not fire doors).
- Remove obstructions from doors and other areas.
- Check that door hold/release systems work, ideally as part of the weekly fire alarm testing regime.
Fire compartmentation needs to be maintained but such passive fire protection may save your business or even someone’s life.
| PAYROLL
Sarah Bradford, Editor-in-Chief, Pay & Benefits Adviser |
HMRC’s Car Benefit Miscalculation Now Resolved
Under the benefits in kind legislation, a tax charge arises where an employee has a company car available for their private use. The amount that is charged to tax depends primarily on the list price of the car and the level of its carbon dioxide (CO2) emissions. The way in which CO2 emissions are measured was changed from 6 April 2020.
What’s Changed?
For cars first registered on or after 6 April 2020, the level of CO2 emissions is determined in accordance with the Worldwide Light Vehicle Test Procedure (WLTP). For cars first registered prior to this date, the level of CO2 emissions was determined in accordance with the New European Driving Cycle (NEDC).
To support the introduction of the new measuring system, for 2020/21 the appropriate percentages for cars, other than zero emission cars, first registered on or after 6 April 2020 (and whose CO2 emissions are measured using the WLTP) were two percentage points lower than for cars with the same CO2 emissions registered before 6 April 2020. For 2021/22 the differential was one percentage point. The appropriate percentages were aligned from 6 April 2022.
For zero emission cars, the charge was the same, regardless of the date on which the car was registered.
Consequently, to calculate the car benefit charge correctly for 2020/21 and 2021/22, it is also necessary to know whether the car was first registered before 6 April 2020 or on or after that date.
HMRC’s Error
Where an employee has a company car, the benefit must be returned on the employee’s P11D if the employer has not opted to payroll the benefit.
Following the processing of P11Ds for 2021/22 and reconciliations for the 2021/22 tax year, HMRC identified an issue which affected the car benefit calculation for employees with a company car with a date of registration of 6 April 2020 or later. Where this was the case, a higher appropriate percentage was used in the calculation of the car benefit charge than should have been used.
HMRC have advised that they have worked with their IT suppliers to correct the issue and that the recovery work has now been completed. Employees who received an incorrect tax calculation for the 2021/22 tax year have been sent a corrected calculation. No employer action is required.
The issue only affected the 2021/22 tax year.
Electric Cars
A problem was also reported in relation to electric company cars where P11Ds were completed for 2021/22 using HMRC’s PAYE online system. In some cases the calculation failed to use the correct appropriate percentage of 1% for electric cars for the 2021/22 tax year, instead defaulting to treating the car as a high emission car with the maximum charge of 37%.
Tax Codes
Employees should be encouraged to check that their tax codes are correct, particularly where the tax code includes an adjustment to collect tax on a company car.