Under the Working Time Regulations (“WTR”), all full-time workers are entitled to 5.6 weeks of paid holiday. Part-time workers (those who work for the full year but only work part of the week) are also entitled to 5.6 weeks of paid holiday but this is pro-rated to ensure their holiday entitlement is proportionate to the amount they work.
There is also another category of workers known as part-year workers who are permanent employees working for only part of a year under a permanent or continuous contract. This type of working arrangement is very common in the educational sector (as they work term time only).
For employers engaging part-year workers, calculating holiday pay must now be revisited following the recent ground-breaking judgment in Harpur Trust v Brazel.
By way of background, Ms Brazel was employed on a zero hours contract to teach music. She worked on an ad hoc basis during term time and her working hours varied week to week. Under her contract Mrs Brazel was entitled to receive 5.6 weeks holiday to be taken during school holidays.
Initially, her holiday pay calculation was based on her average pay over a 12-week period ignoring any weeks which were not worked (the correct method at that time). However, in September 2011 the Trust changed their way of calculating holiday entitlement and pay. Relying on the ACAS guidance at the time, they capped her holiday pay to 12.07% of termly earnings. As a result, Ms Brazel received less annual leave and therefore less pay and commenced proceedings in the Employment Tribunal for unlawful deduction of wages. The Trust’s argument was that it had applied this formula to ensure that part year workers weren’t better off that those who worked throughout the year.
The Supreme Court overturned the previously settled practice of calculating holiday pay for part-year workers by using the 12.07% method (the method used for casual and zero hours workers) as it found it to be inconsistent with the Working Time Regulations. It held that these workers must receive 5.6 weeks statutory holiday.
What does the decision mean?
• All part year workers must receive 5.6 weeks paid holiday each year. This also impacts zero hours workers and therefore the method of calculating their leave must also be revisited.
• Their pay must be calculated according to a week’s pay and so over the last 52 weeks of earnings, ignoring any weeks when work was not carried out.
• As a result, it’s clear (and somewhat unusual) that part year workers like Mrs Brazil will receive holiday pay that represents a higher proportion of their annual pay than full or part time workers who work regular hours.
Please contact our Employment team to review and discuss your current approach to calculating holiday pay for these workers (and casual workers), reviewing contracts and generally discussing other options to minimise any risks of future claims by employees.