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Case update: Holiday entitlement and pay for part-year workers should not be pro-rated

In the recent case of Harpur Trust v Brazel, the Supreme Court has ruled that workers on permanent contracts who only work for part of the year are entitled to the same paid holiday entitlement as workers who work for a full year.

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Published 25 July 2022

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The Working Time Regulations 1998 (SI 1998/1833) (WTRs) entitle workers to take 5.6 weeks’ holiday per year. For a full-time worker on a permanent contract this means that their minimum statutory holiday entitlement is 28 days (inclusive of bank holidays). However, calculating holiday entitlement and pay for casual and part-year (e.g. term-time workers) has been notoriously problematic. This is particularly the case when workers have irregular working patterns and it is not known how many hours they might work each week.

One method employers have used to address this is to allow casual workers to accrue holiday based on an accrual rate of 12.07% of hours worked. Whilst this calculation could potentially lead to some unreliable results, calculating holiday on this basis was previously in line with Acas guidance.

What is the 12.07% method?

This is where holiday entitlement is calculated as a percentage of hours worked.

There are 52 weeks in a year. If a worker’s full 5.6 weeks’ holiday entitlement is deducted from 52, this leaves 46.4 working weeks in the year. 5.6 weeks’ holiday entitlement per year is 12.07% of 46.4 working weeks per year.

However, in the recent case of Harpur Trust v Brazel, the Supreme Court has ruled that workers on permanent contracts who only work for part of the year are entitled to the same paid holiday entitlement as workers who work for a full year. This means that the paid holiday entitlement of a part year worker should not be pro-rated for the weeks that they do not work. The 12.07% method should no longer be used to calculate holiday pay of part-year workers on permanent contracts.

About Harpur Trust v Brazel

Ms Brazel is a music teacher for Harpur Trust at Bedford Girls’ School and works under a permanent zero-hours contract. Ms Brazel only works during term times and her working hours vary each week.

The Trust calculated Ms Brazel’s holiday pay using the 12.07% method based on hours she had worked during the previous term. Ms Brazel claimed that this calculation left her underpaid and that it was not compliant with the WTRs.

On 20 July 2022 the Supreme Court held that Ms Brazel should receive the same holiday pay as staff who work all year round.

The WTRs state that workers should be paid a “week’s pay” for each of the 5.6 weeks to which they are entitled. A week’s pay is calculated using an average over a reference period of 52 weeks. Pre-April 2020, the reference period was 12 weeks.

Following the Supreme Court ruling, holiday entitlement should be calculated using the average hours worked over the previous 52 weeks, disregarding any weeks that have not been worked. This can lead to situations in which a part-year worker might receive proportionately more paid holiday than a full-time worker.

The ruling will not affect part-time workers who work set days/hours or term time workers who receive a salary each month, however the ruling does potentially affect casual workers on permanent contracts who work irregular hours.

What should employers do now?

Employers who have used the 12.07% accrual method should review and take advice on the way in which they calculate holiday pay going forward and the terms of any worker or employment contracts.

It is also advisable for employers to consider their potential exposure for underpayments to workers who have received holiday pay based on the 12.07% accrual method.

Unfortunately, holiday pay continues to be a complex area for employers and in the current circumstances, legislative change in this area in the near future seems unlikely.

If you have any queries regarding this decision or holiday pay more generally, please contact the Employment Team.

 

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Shorter Reads

Case update: Holiday entitlement and pay for part-year workers should not be pro-rated

In the recent case of Harpur Trust v Brazel, the Supreme Court has ruled that workers on permanent contracts who only work for part of the year are entitled to the same paid holiday entitlement as workers who work for a full year.

Published 25 July 2022

Associated sectors / services

  • Employment law for employers

Authors

The Working Time Regulations 1998 (SI 1998/1833) (WTRs) entitle workers to take 5.6 weeks’ holiday per year. For a full-time worker on a permanent contract this means that their minimum statutory holiday entitlement is 28 days (inclusive of bank holidays). However, calculating holiday entitlement and pay for casual and part-year (e.g. term-time workers) has been notoriously problematic. This is particularly the case when workers have irregular working patterns and it is not known how many hours they might work each week.

One method employers have used to address this is to allow casual workers to accrue holiday based on an accrual rate of 12.07% of hours worked. Whilst this calculation could potentially lead to some unreliable results, calculating holiday on this basis was previously in line with Acas guidance.

What is the 12.07% method?

This is where holiday entitlement is calculated as a percentage of hours worked.

There are 52 weeks in a year. If a worker’s full 5.6 weeks’ holiday entitlement is deducted from 52, this leaves 46.4 working weeks in the year. 5.6 weeks’ holiday entitlement per year is 12.07% of 46.4 working weeks per year.

However, in the recent case of Harpur Trust v Brazel, the Supreme Court has ruled that workers on permanent contracts who only work for part of the year are entitled to the same paid holiday entitlement as workers who work for a full year. This means that the paid holiday entitlement of a part year worker should not be pro-rated for the weeks that they do not work. The 12.07% method should no longer be used to calculate holiday pay of part-year workers on permanent contracts.

About Harpur Trust v Brazel

Ms Brazel is a music teacher for Harpur Trust at Bedford Girls’ School and works under a permanent zero-hours contract. Ms Brazel only works during term times and her working hours vary each week.

The Trust calculated Ms Brazel’s holiday pay using the 12.07% method based on hours she had worked during the previous term. Ms Brazel claimed that this calculation left her underpaid and that it was not compliant with the WTRs.

On 20 July 2022 the Supreme Court held that Ms Brazel should receive the same holiday pay as staff who work all year round.

The WTRs state that workers should be paid a “week’s pay” for each of the 5.6 weeks to which they are entitled. A week’s pay is calculated using an average over a reference period of 52 weeks. Pre-April 2020, the reference period was 12 weeks.

Following the Supreme Court ruling, holiday entitlement should be calculated using the average hours worked over the previous 52 weeks, disregarding any weeks that have not been worked. This can lead to situations in which a part-year worker might receive proportionately more paid holiday than a full-time worker.

The ruling will not affect part-time workers who work set days/hours or term time workers who receive a salary each month, however the ruling does potentially affect casual workers on permanent contracts who work irregular hours.

What should employers do now?

Employers who have used the 12.07% accrual method should review and take advice on the way in which they calculate holiday pay going forward and the terms of any worker or employment contracts.

It is also advisable for employers to consider their potential exposure for underpayments to workers who have received holiday pay based on the 12.07% accrual method.

Unfortunately, holiday pay continues to be a complex area for employers and in the current circumstances, legislative change in this area in the near future seems unlikely.

If you have any queries regarding this decision or holiday pay more generally, please contact the Employment Team.

 

Associated sectors / services

  • Employment law for employers

Authors

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