New research* has revealed that 88% of employers and HR professionals don’t fully understand how the Supreme Court’s ruling in Harpur Trust v Brazel, will impact their business.

The landmark Judgment in July 2022, which outlawed the use of the popular 12.07% method to calculate holiday entitlement and pay for part-year workers, meant that many employers would need to change their holiday practices immediately and decide how to deal with any past underpayments to avoid the risk of holiday pay claims. This included those who employ permanent zero hours, ad-hoc, or term-time workers, have applied the 12.07% formula to calculate holiday accrual and who have either waited for the finality provided by the Supreme Court’s decision or who have been unaware of this case. The change is required to prevent any underpayment of holidays going forward.

WorkNest’s autumn study into the impact of the Judgment found that more than half (57%) of respondents hadn’t updated their procedures in line with the decision yet, while only 11% of employers and HR professionals had. In addition, almost a third (30%) of respondents believed the move away from the 12.07% formula impacted 10 to 50% of their workforce, and 14% of employers thought it affected more than 51% of their workforce.

Over half (55%) of employers and HR professionals revealed that their main concern was updating their current procedures. A further 16% said their main worry was a lack of HR software that accurately tracks holiday entitlements and pay.

Lesley Rennie, Principal Employment Law Solicitor at WorkNest, said, “Following the recent Supreme Court decision, it’s critical businesses review how they manage holiday entitlement and pay for part-year workers, as it affects a significant section of the UK workforce. However, it is worrying that a substantial number of organisations still haven’t taken any action to update their practices.

“Undertaking such a review and making changes to the status quo can be daunting, but employers must remember that support is available. They can take legal advice to ensure their organisation stays compliant with legislation and to identify, assess and manage the risk of any claims against them. The decision affects organisations across most sectors, from education to hospitality to retail and care. So, the sooner organisations update their holiday entitlement and pay calculations, the better. Doing nothing could result in a considerable financial liability.”

*Research by WorkNest