Changes to Holiday Entitlement for Part Year Workers (Harpur Trust v Brazel)
Earlier this year, the Supreme Court reached a decision in the case of Harpur Trust v Brazel. This decision is likely to have a significant impact on organisations, especially educational institutions, that employ ‘part year’ employees on variable hours e.g. term time only employees or workers or zero hour workers. Following this decision, such workers may be entitled to more annual leave.
The scope of this ruling does not affect the use of the accrual method of holiday pay entitlement for full time workers, part time workers who are paid an even amount throughout the year, or employees engaged on short, fixed term contracts.
The background
This case involved a music teacher, Ms Brazel, who was employed on a permanent, zero-hours, term-time contract. She was required to work during term-time only and her hours varied depending on pupil needs. Ms Brazel had to take her holiday outside term time and the amount of holiday she was given was calculated using the percentage method: the school calculated 12.07% of her hours each term and paid her at her hourly rate for those hours in the subsequent holiday period.
Ms Brazel argued that this was not correct and said that she was entitled to payment for 5.6 weeks’ holiday in accordance with the legal rules for workers with no normal hours of work. She said that her holiday pay should be based on her average pay during working weeks and that the 12.07% method had no basis in law.
The decision
The Employment Tribunal dismissed Ms Brazel’s claim, but the Employment Appeal Tribunal, Court of Appeal and the Supreme Court all agreed with Ms Brazel.
What does this mean for employers?
This decision means that the use of 12.07% of an employee’s hours (the percentage method) should not be used to calculate holiday. Previously, ACAS guidance recommended that casual workers should accrue statutory holiday entitlement at the rate of 12.07% of hours worked but this guidance has now been withdrawn
All employees should have their holiday pay calculated based on their average earnings over the previous 52 working weeks and all employees will receive 5.6 weeks’ leave. This ruling could have a particular impact on the education sector where it is standard practice to employ term time only staff who, although they are under contract for a full year, will only work for a few weeks on variable hours around exam times, such as exam invigilators or music teachers. The Harpur Trust v Brazel ruling means that even if an employee works just one week in a year, they would still be entitled to 5.6 weeks of paid holiday at the same rate of pay as the one week that was worked.
UPDATE
The Department for Business, Energy and Industrial Strategy (BEIS) has launched a consultation to address issues arising from the Supreme Court’s judgment last year in Harpur Trust v Brazel.
This Harpur Trust v Brazel case concerned the calculation of holiday pay and entitlement of a permanent part-year worker on a zero-hours contract. The judgment found that the correct interpretation of the Working Time Regulations 1998 is that holiday entitlement for part-year workers should not be pro-rated so that it is proportionate to the amount of work that they actually perform each year.
Part-year workers are entitled to 5.6 weeks of statutory annual leave calculated using a holiday entitlement reference period to determine their average weekly pay, ignoring any weeks in which they did not work. As a result of the Harpur Trust ruling, part-year workers are entitled to considerably more holiday entitlement than part-time workers who work the same total number of hours across the year.
The launch of the consultation shows the government recognises that that the way the law is written creates unintended anomalies and these need to be rectified. BEIS proposes the introduction of a holiday entitlement reference period for part-year workers and those working irregular hours, to ensure that their holiday pay and entitlement is directly proportionate to the time they spend working. This will involve calculating hours worked in the previous 52 weeks and multiplying them by 12.07% to calculate a part-year worker’s annual statutory entitlement in hours.
The closing date for the consultation is 9 March 2023.