A Supreme Court judgment is eagerly awaited by employers where clarity is expected to be provided on how to approach calculating holiday pay for workers with irregular hours. This decision will not only impact those employers in the education sector, but also those who engage workers who do not work the full year under a zero hours contract.
All workers are entitled to the legal minimum of 5.6 weeks holiday, or 28 days. For a full time worker, this leave equates to 12.07% working time. By applying 12.07% to part-time workers, this pro-rates their holiday entitlement based on their hours worked.
The case of Harpur Trust v Brazel was heard on 9 November 2021 and the Supreme Court published a full case preview on 1 April 2022.
The worker in this case was a music teacher engaged on a term-time only zero hours contract, whose holiday pay was capped at 12.07% of her annualised hours. This method is standard industry practice for term-time workers. It was argued that the holiday pay should be calculated based on the average weekly pay received 12-weeks immediately preceding the date the holiday is taken [please note, since 6 April 2020, after this case was heard, the reference period has increased from 12 weeks to 52 weeks].
By applying the 12.07% calculation, it was argued that she was left worse off compared to the averaging method. However, if the averaging method is used, this will mean that holiday pay would not be reduced to reflect part-year working and as a result a part-time worker may end up receiving more holiday than a full time worker.
The Court of Appeal used the term 'part-year' worker to describe those employed all year round but who did not work the whole year, and held that there was no requirement to pro-rate the leave entitlement for part time workers. The only requirement under the Working Time Regulations is to work out a week's pay and multiply it by 5.6, which is the method that should be applied to these workers.
The Court of Appeal further considered the protection that part-time workers have, who are not to be treated less favourably than full-time workers.
It was held that the holiday pay should be calculated using the average weekly earnings during the 52-week period immediately preceding the date the holiday was taken, not the 12.07% calculation.
The Trust in this case appealed to the Supreme Court:
- If they overturn the Court of Appeal's decision, the 12.07% practice for irregular workers will be confirmed and can continue in line with current practice and ACAS Guidance; or
- If the decision is upheld by deciding that holiday should be calculated using the 52-week average method, it could open up the floodgates for term-time workers who will be seeking back pay for underpaid holiday, and the impact could be a significant cost to employers, particularly in the education sector.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.