In July’s Top 5 HR Questions, we answered a question about how to calculate term time workers holiday. However, since then, there has been a decision on how to calculate holiday for workers with variable hours/term time workers in the case of Harpur Trust v Brazel. This case has taken over 7 years to reach its conclusion, and the Supreme Court’s judgment in this matter has now been confirmed just a few weeks ago, so please read this important update.

Background

This case involved a very specific set of circumstances but has implications for all atypical workers on variable hours and those who work part year, that makes this a case of critical importance in the matter of holiday pay and leave calculation.

This involved a music teacher, employed on a permanent, zero-hours term-time basis. She was required to work during term-times only, and her hours would vary in accordance with pupil needs. She had to take her holiday outside of term time, and the method the school used to calculate this is what has become called the “percentage method”. Essentially, the school would calculate 12.07% of her hours each term and pay her at her hourly rate for resulting hours in the subsequent holiday period.

Brazel argued that this was not correct and that she should be paid based on her average hours worked over 12 weeks in which she has worked (as was required at the time of the case. Now a 52-week average should be applied). As her employer disagreed with this, a claim was raised.

The Employment and Appeal Tribunal

The tribunal dismissed her claim, finding that the school had calculated her holiday pay correctly by applying the pro rating principle, which was in accordance with the Working Time Regulations 1998.

The claimant appealed to the Employment Appeal Tribunal (EAT), who ruled in her favour. They found that section 224 of the Employment Rights Act 1996 provided a simple and straightforward method of calculating pay for workers with irregular hours over a 12-week reference period.

In forming their decision, the EAT held that although part-time workers could not be treated any less favourably than full-time workers, the WTR did not provide any requirement to pro-rata holiday pay for employees working for part of the year, such as term time only workers, to ensure that full-time employees were not treated any less favourably.

The Court of Appeal (CoA)

The organisation appealed to the CoA. They argued that it was necessary to reduce the claimant’s holiday entitlement to avoid unjust results, as the approach suggested would result in other workers on zero-hour contracts who worked for lesser proportions of the year, such as a school cricket coach, being entitled to holiday pay exceeding that of a full-time staff member.

The CoA dismissed this. They outlined that the Working Time Directive (WTD) only requires workers to accrue annual leave in proportion to the time they work, something the Court labelled the ‘accrual approach’. However, this does not apply to remuneration for that leave. The WTD therefore placed no requirement on member states to pro-rata leave entitlements of ‘part-year workers’ to that of ‘full-year workers’.

The Court did accept that this ruling could lead to odd results in ‘extreme cases’, such as the school cricket coach example mentioned earlier, but concluded that it would be unusual for an individual who only worked a few hours a year to be on a permanent contract, and that this was not ‘unprincipled or obviously unfair’.

The Supreme Court

Essentially, they agreed with the CoA. Specifically, they said:

“In short, the amount of leave to which a part-year worker under a permanent contract is entitled is not required by EU law to be, and under domestic law is not, prorated to that of a full-time worker.”

What does this mean for holiday calculations?

This means now that the use of 12.07% of a workers hours should not be used, as this can leave some worse off. Instead, all workers should have their holiday pay calculated based on their average earnings over the previous 52 working weeks, and all workers will get 5.6 weeks leave.

What does this not mean?

To clarify, this does not change the position for part-time workers, just part-year workers. Part-time workers who work a full 52 weeks of the year but for less hours or days than their full-time colleagues, can continue to have their holiday calculated pro-rata. It also does not change the position for fixed term employees, whose holiday can continue to be calculated pro-rata for the duration of the contract.