Supreme Court rules on holiday pay for part-year workers

Supreme Court rules on holiday pay for part-year workers

The Supreme Court’s recent ruling on the case of a visiting music teacher is now an important consideration in calculating holiday pay for part-year workers. Markel Law’s employment law solicitor, Hannah Thomas, analyses the case.

The case

In July, the Supreme Court reached a verdict on the case of Harpur Trust v Brazel. The case involved a visiting music teacher, Mrs Brazel, at a school in Bedford, who worked varying hours but only during term times. She had a permanent zero hours contract and was paid hourly. Her arrangement with the school trust had been that she would take her annual leave outside of term time, when there was no requirement for lessons.

The trust calculated Mrs Brazel’s holiday pay entitlement by taking the number of hours she had worked at the end of each term, taking 12.07% of that figure, and then calculating the hourly rate for that number of hours. It argued that annual leave entitlement for people who only work part of the year should be pro-rated to reflect the actual amount of work done.

The ‘12.07% formula’ is a commonly used method for calculating holiday pay for workers with irregular hours. 12.07% is the minimum holiday allowance per year – 5.6 weeks – expressed as a percentage of the number of working weeks in a year, which is 46.4.

Mrs Brazel argued that pro-rating her holiday pay in this way was unlawful, is it was contrary to the Working Time Regulations. Instead, she said, she should have received a week’s pay for each of the 5.6 weeks’ leave she was entitled to, with her weekly pay worked out based on an average of the preceding 12 weeks (since then, the reference period for average weekly pay for calculating holiday pay for workers without fixed pay has been increased from 12 weeks to 52).

The claim was initially dismissed by an employment tribunal, but was subsequently upheld by both the Employment Appeal Tribunal and the Court of Appeal, leading the school trust to appeal to the Supreme Court.

The ruling

In its own ruling, the Supreme Court found that all workers, including part-year workers, are entitled to 5.6 weeks of paid holiday per year. The reference period method was the one adopted by legislation, not any other method, including the 12.07% method preferred by the trust.

Even the fact that the reference period method could sometimes produce strange results did not justify deviating from it, the court held. One example would be a worker employed on a permanent contract only working for one week of the year, but still accruing 5.6 weeks of paid leave per year.

What does the ruling mean?

Although particularly relevant to school workers such as Mrs Brazel, the case is important for any worker employed on a permanent contract over the whole year, but who has periods where there is no work to be done.

The Court’s decision is “not surprising”, says Hannah Thomas, a solicitor and employment law specialist at Markel Law, because of gaps in the relevant legislation, which “does not define what a week’s leave is for workers who do not fit neatly into either ‘full-time work’ or ‘part-time work’, because they do not work set hours or days per week, or do not work each week”.

The ruling confirms that the 12.07% method cannot be relied on, having been rejected by the final court of appeal. As a result, “businesses will now be at risk of holiday pay claims” in some cases if they have relied on that method. Unfortunately, says Hannah, until new legislation is introduced in Parliament to address this problem, there is “no legal solution” for businesses who employ workers on irregular hours that don’t work all year but have contracts for the whole year to calculate holiday entitlement.

Action to take

One solution for employers might be to designate certain weeks as holiday for permanent employees, although this would remove one of the advantages of zero-hours work. Another approach might be to reconsider entirely whether a permanent contract is the most suitable arrangement. Until new legislation is brought forward, extra care will need to be taken.