Wrongly calculated holiday pay

Harpur Trust v Brazel [2019]

It is usual for part-time staff who work a full year to have their holiday pay pro-rated but in a recent decision by the Court of Appeal, a different calculation should be applied to staff who only work part of the year (e.g. term-time workers).  In Harpur Trust v Brazel, the judge held that staff who only work part of the year should instead have their holiday pay calculated using their average earnings over 12-week period.

The Claimant in this case was a music teacher and permanent employee at Bedford Girls’ School, working during term-time only under a zero-hours contract.

Under the Working Time Regulations 1998, all workers (including part-time workers) have a right to a minimum of 5.6 weeks’ annual leave.  Workers are entitled to be paid a weeks pay in respect of each week of annual leave.  As in this case, difficulties can arise where a worker does not have normal working hours.

A common approach, and indeed the one recommended by ACAS, is that a worker accrues holiday entitlement at the rate of 12.07% of the hours worked.  The rationale for this calculation being that a standard working year is 46.4 weeks (52 weeks less the statutory 5.6 weeks annual leave).  5.6 weeks is 12.07% of 46.4 weeks. 

The school changed the way they paid the Claimants holiday pay so that it complied with the method recommended by ACAS (set out above).  The Claimant received holiday pay in three payments during the year.  The payments were made at the end of each term and calculated as one third of 12.07% of her earnings for the relevant term. 

The Claimant argued that this method bore no relation the calculation established by the working time regulations and subsequently put her in a worse position financially.  She asserted that in accordance with section 224 of the Employment Rights Act 1996, her holiday pay should be calculated using her average earnings for the 12-week period immediately before any annual leave taken.  This calculation provided that she should paid holiday pay worth 17.5% of her earnings rather than 12.07%.   

In her claim for unlawful deduction of wages, the employment tribunal ruled that the school was using the correct method (12.07%) to calculate her pay.  However, the Employment Appeal Tribunal and COA disagreed and held that the working time regulations does not require leave for workers such as the Claimant to be reduced pro rata.  This is despite full-time workers potentially being disadvantaged compared to their part-time worker colleagues.  There is nothing in the working time regulations to say that a full-time worker must not be at a disadvantage when compared to a part-time worker.

Legal opinion

This case is an important development in the law of holiday pay which continues to evolve in line with modern working practices. 

Although this decision only applies to workers on permanent contracts, employers should be aware of the possibility of part-year workers raising the issue of their holiday pay (and possibly bringing claims for unpaid holiday back pay).  We anticipate that there will be further claims by part-year employees which will expand the scope of this decision to beyond persons working in schools.   

It could potentially lead to casual workers on temporary or casual contracts to try and use the same argument that their holiday pay should not be subject to the 12.07% cap.

We would advise employers to consider whether they are vulnerable to such a claim, especially if the 12.07% approach to pay holiday for their zero hours staff with permanent contracts is used.

Our legal expert team can guide you through this incredibly complex area of law so that you do not fall foul of the strict regulatory requirements. Please do not hesitate to get in touch.