Part-year & casual workers are entitled to the same holiday as full year workers
The Supreme Court has ruled in Harpur Trust v Brazel that workers who only work for part of the year, but on permanent contracts, are entitled to the same holiday allowance as workers who work all year. This means that the 12.07% method for calculating the holiday pay hours of casual workers on permanent contracts is no longer correct.
Holiday calculation for term time or casual workers
Under the Working Time Regulations 1998 (WTR), all workers are entitled to 5.6 weeks' holiday each year. For those who don't have regular working hours, employers are to calculate holiday by looking at average earnings over the previous 52 weeks, discounting weeks where no work was carried out. This is complicated where a person works irregular hours, requiring detailed records of hours worked, even in cases where workers don't work on an hourly basis. Because of this, some employers have calculated holiday pay in such circumstances by applying 12.07% of pay per hour or pro-rating holiday entitlement to reflect the number of weeks the person actually worked in a year. The Supreme Court's decision means that this 12.07% approach should not be used any longer. Employers must calculate the average pay received during the 52 week period before the worker went on annual leave, ignoring any weeks where the worker did not work.
Harpur Trust and Brazel - the background
Lesley Brazel was engaged by The Harpur Trust, which runs Bedford Girls' School, on a permanent zero-hours contract as a "visiting" music teacher. Mrs Brazel worked term times only. Her working hours varied, to cater for the changing number of pupils requiring tuition each week, and she was paid an agreed hourly rate each month for the hours worked in the previous month.
Mrs Brazel took her annual leave during the three school holidays when she was not teaching. The Trust made payments for her leave at the end of each school term, calculated as one-third of 12.07% of her earnings in the previous term.
Mrs Brazel claimed that she was being underpaid for her holiday. She asserted 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 Trust argued that there had to be some principle of pro rating so that holiday entitlement and pay reflected hours actually worked.
The Employment Tribunal dismissed Mrs Brazel's claim, but the Employment Appeal Tribunal and Court of Appeal both agreed with Mrs Brazel. The Trust appealed to the Supreme Court (SC), and Acas withdrew the 12.07% guidance.
Supreme Court rules that the 12.07% method is wrong
The Supreme Court agreed with the Employment Appeal Tribunal and Court of Appeal and ruled that:
The EU Working Time Directive, on which the WTR are based, generally calculates holiday by reference to work actually carried out by the worker. However, EU law does not prevent the UK from making more generous provision for holiday for part-year workers. It is also not discrimination against full-time workers, as EU law only covers less favourable treatment of part-time workers. This means that the amount of leave to which a part-year worker under a permanent contract is entitled is not required to be proportional to that of a full-time worker.
The answer therefore depends on interpretating the wording of domestic law. Looking at the WTR, the amount of leave to which a part-year worker under a permanent contract is entitled must not be pro-rated in this way. The correct calculation is the "calendar year" method set out in the WTR - i.e. average pay over a reference period, which does not include weeks in which there was no pay.
The alternative methods of calculation put forward by the Trust were rejected as not complying with the WTR. These were the 12.07% method, and a more complex "worked year" method. The SC said that Parliament had made a policy choice that holiday pay for irregular hours workers should be calculated in accordance with average pay over a reference period.
The alternatives put forward by the Trust were also rejected because they would involve complicated calculations for those working irregular hours, requiring all employers and workers to keep detailed records of every hour worked even if they were not paid at an hourly rate (although in our view this is not a compelling point as employers already tend to keep detailed records for workers with irregular hours).
Although this meant workers in Mrs Brazel's position received holiday pay representing a higher proportion of their annual pay than those working regular hours, a slight favouring of workers with a highly atypical work pattern is not so absurd as to justify the wholesale revision of the statutory scheme.
Where does the law stand now?
Workers under permanent contracts are entitled to 5.6 weeks' holiday per year, regardless of the amount of work they do. Pay must be calculated in accordance with the legal provisions for holiday pay and not the 12.07% method. In practice, this does not impact "classic" part-time workers with set hours, for example those on a 3-day standard week. Holiday entitlement can still be calculated as a reduced number of days compared to a 5-day week worker because in practice they will end up with 5.6 weeks of holiday at their normal rate of pay.
The significant impact of the ruling is on people who are under a permanent contract for the whole year but actually work for less than a full year, such as term time only workers. As argued by the Trust, this could lead to some "absurd" results. For example, an exam invigilator retained on a permanent contract who works only one week of the year, earning £1,000 for that work. The invigilator would be entitled to 5.6 weeks' annual leave. Holiday pay for this leave must be calculated based on their average pay over the last 52 weeks - but ignoring any weeks in which they received no pay. So, they would receive £5,600 holiday pay for a job that paid only £1,000. This seems to be rather more than the "slight" favouring of atypical workers referred to by the SC, but the SC dealt with this by saying that general rules sometimes provide anomalies in untypical cases, and that it would be unusual for this kind of arrangement to be a permanent contract.
The affects all casual workers with no normal working hours operating under permanent contracts. It completely rejects the 12.07% approach. Even if workers in these situations work fewer than 46.4 working weeks in the year, the employer must still provide 5.6 weeks of holiday and pay holiday pay for those 5.6 weeks on the basis of average weekly pay over the last 52 paid weeks.
Sourced from Mondaq