Are your employees on zero-hours or term-time only contracts?
If you have employees on permanent contracts who only work part of the year, such as those on term time only contracts or zero-hours contracts, (‘part-year workers’) the decision of the Supreme Court in Harpur Trust v Brazel may affect your business.
The Supreme Court has upheld the Court of Appeal’s earlier decision that part-year workers are entitled to a minimum of 5.6 weeks annual leave per holiday year.
Their holiday entitlement shouldn’t be pro-rated even though they don’t work all year round (like some colleagues).
Furthermore, employers must be careful when calculating employee holiday pay. If you’re unsure, please get in touch right away.
How did the case unfold?
This case concerned a school music teacher employed on a permanent zero-hours contract to teach music during term time.
Her working hours varied each week, she was only paid for the hours she worked, and she had long periods without work during the school holidays.
At the end of each school term, she would take her accrued holiday and the school would pay her holiday pay based on an entitlement of 12.07% of the hours worked over the term.
She brought a claim arguing that she had been underpaid on holiday. She has won.
The case went all the way to the Supreme Court with the employer arguing amongst other things that as the employee only works for part of the year her holiday entitlement should reflect the amount of work she performs during the holiday year.
The Court of Appeal and now the Supreme Court have ruled that such pro-rating is not appropriate for part-year workers on a permanent contract.
They have an entitlement to 5.6 weeks holiday and to be paid a ‘week’s pay’ for each week of holiday. The employer shouldn’t have used the ‘12.07% calculation method’.
For employees who do not have normal working hours like the employee in this case, a week’s pay is taken to be the employee’s average weekly pay during the reference period immediately before the start of the leave.
The reference period at the relevant time in this case was 12 weeks. This changed with effect from April 2020 and is now usually 52 weeks.
In calculating the average weekly pay, any weeks where no remuneration has been received must be ignored and an earlier week is taken into consideration (up to a maximum of 104 weeks).
The Supreme Court has acknowledged that this decision favours part-year employees but concluded that any slight favouring of workers with a highly atypical work pattern was not so absurd as to justify the wholesale revision of the statutory scheme.
Employ 'part-year' workers? Check their holiday entitlement.
If your organisation employs ‘part-year’ employees, check their holiday entitlement, and how you calculate holiday pay for them and your contracts.
If your business is affected by the decision in this case, contact us to discuss your situation.
What about part-time employees?
The decision, in this case, is about part-year employees – it doesn’t affect part-time full-year employees (e.g. an employee who is employed to work Monday to Wednesday year round).
If you have a question about any employment law matter or receive a complaint from an employee about their holiday entitlement/holiday pay get in touch for advice.