Landmark Case: Calculating holiday entitlement for part-year workers

Landmark Case: Calculating holiday entitlement for part-year workers

The legal minimum holiday entitlement under the Working Time Regulations 1998 (WTR) (as amended), workers (including part-timers and most agency and freelance workers) have the right to 5.6 weeks paid leave each year.

The Supreme Court held in the case of Harpur Trust v Brazel that part-year workers are still entitled to receive 5.6 weeks of statutory holiday pay under the WTR 1998. In this case, Ms Brazel is a music teacher who was employed by Harpur Trust on a permanent contract. Ms Brazel only worked during term-time and was paid for the hours she taught which varied from week to week. It was held that the music teacher’s holiday had to be calculated at the end of each term based on average earnings over the last 12 remunerated weeks as required by the WTR 1998 and Employment Rights Act 1996 at the time (before 6 April 2020, the reference period was 12 weeks, but it is now 52).

Her contract of employment stated she was entitled to 5.6 weeks annual leave, which needed to be taken outside of term time. The Brazel Trust paid her 12.07% of the term’s accrued hours at the end of each term, in three instalments, following the non-binding ACAS guidance which gives this as the correct approach for calculating holiday pay for casual workers and suggests doing the same for term-time only workers.

The Trust appealed the initial decision, which The Supreme Court has now dismissed. It deemed that the 12.07% method is not compliant for part-year workers. It agreed with Mrs Brazel that there was nothing in the WTR 1998 to suggest using the 12.07% method. As a result, it was held that even though she only worked part of the year, she would still be entitled to the full 5.6 weeks’ holiday.

This confirms that part-time/term-time employees must receive the same amount of paid annual leave as those working a full year. This means that employers may need to review how they allocate holiday entitlement and compensate those who have previously calculated holidays using a pro-rated calculation to ensure they comply with the ruling. The ruling concludes with the following statement: “The amount of leave to which a part-time worker under a permanent contract is entitled to is therefore not required to be, and under domestic law must not be, pro-rated to be proportional to that of a full-time worker.”

Since only remunerated weeks are considered when calculating average pay for holiday pay purposes, the result is that a term-time worker who works 38 weeks a year, at 35 hours per working week, would get the same paid holiday entitlement of 5.6 weeks under the WTR 1998 as someone working a full year of 46.4 working weeks at 35 hours a week.

This means that employers who have previously calculated holidays using a pro-rated calculation may need to review how they allocate holiday entitlement and pay to ensure they comply with the ruling.

Workers employed on a casual or zero-hours basis, who are employed for less than 12 months, will not be impacted by this ruling, and will still be entitled to holiday based on the number of actual hours they have worked.

Calculating holiday pay
For full-time workers they get 5.6 weeks of paid holiday, therefore calculating holiday pay is simple. It is quite straightforward for part-time workers as those who work for the full year but work only part of the week, they also get 5.6 weeks of holiday, but it is pro-rata which means holiday pay will be based on their weekly earnings, so money earned for the days they work a week.
Part-year workers will also be entitled to 5.6 weeks’ holiday according to the Supreme Court’s decision. When calculating their holiday pay an employer should take an average of the last 52 weeks that an employee has worked so the employee will be paid based on their average earnings in the past 52 weeks. Part-year workers who also work part-time, their pay will be calculated in the same way it would be for anyone working part-time throughout the year.

For example, if a term-time only worker is required to work five days a week during school term-time only (39 weeks), then their statutory holiday entitlement will be 28 days (5.6 x 5 = 28 days); or if a part-year worker regularly works four days a week in the six months (26 weeks) of the year when they are required to work, then their statutory holiday entitlement will be 22.4 days (5.6 x 4 =22.4) The precise number of days’ holiday will depend on the regular working pattern of the particular worker (during the part of the year they are required to work).

Why is the Supreme Court ruling important?
The Supreme Court’s decision in the case of Brazel vs Harpur Trust 2022 applies to all part-year workers therefore it will impact many employees from a range of sectors including the NHS, schools, and those on permanent zero-hours contracts.

Many Companies have calculated holiday accrual for employees with variable hours, or employees working for just part of the year, as 12.07% of the hours worked by employees, as statutory holiday entitlement for full-time workers is 12.07% of hours worked.

If employees have an irregular working pattern, but their contract still covers the entire year, then their holiday pay may be calculated incorrectly. Any employer who calculates holiday pay by applying the 12.07% method (paying 12.07% of normal pay) is no longer applying the law correctly as the method is not compliant for part-year workers.

Employers may want to use shorter fixed-term contracts to mitigate the burden of additional costs for increased holiday entitlement. The Supreme Court’s decision does not apply to workers who are only engaged for part of a year (e.g. a worker on a fixed term contract for a single school year running from September until July or seasonal workers covering a busy period such as Christmas).

It may be beneficial to seek legal advice if employers are uncertain about whether they are paying the correct holiday pay for part-year workers and confirm with any agencies used to employ staff to ensure that the agency in question is applying the correct rates.

If you are receiving incorrect holiday pay or you are an employer and would like advice on holiday pay or contract drafting for part-term workers, we at Kalra Legal Group are here to assist you.
By Lakhvinder Kaur Digpal
Employment Solicitor at Kalra Legal Group
11/10/2023