Supreme Court ruling: holiday pay for part-year employee not to be pro-rated

Gavel and weights

The Supreme Court has handed down their long-awaited judgement in the Harpur Trust v Brazel case, which rules that part-year workers (such as term-time-only staff) should not have their holiday entitlement reduced to reflect the fact that they do not work through the full year.

This case involved a visiting music teacher employed by a school under a permanent variable hours term-time-only contract. Given that she did not work for large parts of the year, she was referred to by the courts as a ‘part-year worker’. She was required to take her annual leave during school holidays and was paid three annual payments in respect of this. Her holiday pay was calculated at 12.07% of her earnings in the preceding term (thereby effectively pro-rating her salary not only because she was part-time, but also because she only worked part of the year) rather than applying the usual rule for calculating holiday pay for variable hours workers.

At the time this claim was brought, the usual rule for calculating holiday pay for people working variable hours would have involved averaging their pay over the preceding 12 weeks they worked, which would have resulted in holiday pay of around 17.5% of her earnings for the term (in April 2020 the averaging period was increased from 12 weeks to the previous 52 weeks they worked).

Ms. Brazel’s case was initially dismissed by the Employment Tribunal, which held that the Harpur Trust had applied the correct method of calculating her holiday pay. This decision was overturned by the Employment Appeal Tribunal which found in Ms. Brazel’s favour. The case went to the Court of Appeal which found that the Working Time Regulations did not require leave for term-time workers to be reduced pro-rata to reflect the fact that they did not work throughout the whole year.

The case was appealed to the Supreme Court in November 2021 when the Trust once again argued that a part-year worker’s holiday should be pro-rated to take into account the weeks they do not work. Last week, the Supreme Court handed down their judgement on the case, dismissing the appeal and confirming that although applying the statutory calculation for holiday pay may result in a slight advantage for part-year workers, this was not a reason to interfere with the very clear statutory provisions on how variable hours holiday pay should be calculated.

As the Supreme Court’s decision is final, this should put this issue to bed, for the moment… As the appeal failed on the grounds that using an alternative method of calculation would be contrary to Parliament’s clear intention as set out in the statutory wording, Parliament could choose to amend the existing legislation or introduce new legislation to cover this point.

Greater clarity in this area would be welcomed by employers as for several years we have seen significant changes to the rules on how holiday pay should be calculated developed through various EU and UK court decisions (which often left key issues unaddressed). So far, the government have not given an indication that this will be a legislative priority (and already we have quite a backlog of promised Employment Law reforms waiting to make it on to the statute book).

What does this mean for your business?

Although this case involved a term-time-only worker, the ruling will apply to any worker operating under a permanent contract of employment where they are only required to work part of the year. When calculating their holiday, you should not pro-rata this to reflect the fact that they do not work throughout the whole year. It does not affect your ability to pro-rata holiday entitlement for a part-time worker, e.g. someone who is contracted to work 3 days a week. For example, Susan is employed as a cleaner working three days a week, 39 weeks a year. Her colleagues working full time over five days are entitled to 5.6 weeks’ holiday.

Her full-time colleagues would be entitled to 5.6 x 5 = 28 days.

It would still be acceptable to pro-rata Susan’s entitlement to 5.6 x 3 = 16.8 days to reflect the fact that she only works three days per week. However, it would not be acceptable to reduce this further to reflect the fact that she only works 39 weeks a year.

What should you do now?

If you have part-year employees on permanent contracts but already treat their holidays in line with this new ruling, carry on as before. Some businesses chose to change their method of calculation in compliance with the previous appeal decisions but included a specific provision in their contracts of employment reserving the right to change this to bring it in line with any subsequent change in the legal position. Although we have come to an end with the appeals process in the Brazel case, there is no need to change this provision at the moment as we may see a legislative change at some point in the future.

If you have permanent part-year employees and you pro-rata their holiday entitlement to reflect the fact that they do not work throughout the year, this Supreme Court decision has given final confirmation that this practice is not legally compliant and you should seek advice from our employment law experts by contacting us at hrcontent@citation.co.uk.

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