On 20th July, the Supreme Court ruled that employees who work part of the year should receive the same amount of paid holiday as those working a full year. The judgement is the final answer in a case that has been ongoing for quite some time, and the result has potentially significant implications for businesses who have employed people on a part year contract.
What does the ruling state?
The ruling relates to the case of Harpur Trust v Brazel [2022]. Ms Brazel is a zero-hours term-time music teacher who has a contract with the Harpur Trust stipulating she work certain weeks in the year. She works during term-time and does not get paid during school holidays. Her monthly pay is variable, being calculated on the basis of number of hours worked and an hourly rate.
The Harpur Trust originally calculated her holiday by figuring out her average pay over the last 12 weeks. They then changed their method of calculating holiday and started to use the ACAS approved method of calculation, using the rate of 12.07% of hours worked. This is a calculation known as the percentage method and is gained by dividing the amount of annual leave owed (5.6 weeks which equates to 28 days) by 46.4, which is 52 weeks minus 5.6 weeks. Ms Brazel argued that she was now receiving an underpayment and after losing at tribunal, she won at the EAT and Court of Appeal. The Trust appealed to the Supreme Court who have now judged in favour of Ms Brazel.
The methodology for calculating holiday for part year workers will now need to change and all part-year workers should be given 5.6 weeks of holiday based on their average earnings over the past 52 weeks (or longer, if required to get a fair average). When employers are figuring out holiday, they won’t be able to pro-rate the holiday and cannot include weeks where an employee did not work to figure out average pay.
Who does this apply to?
The ruling applies to continuous workers on part-year contracts so employers need to closely look at those who have permanent contracts, but are not expected to work throughout the year. Good examples of these are term-time only teachers, such as the part-time music teacher who brought the case, Ms L Brazel and off-shore oil rig workers. According to an article in People Management, it will not impact casual or zero hours employees who are employed for short periods of time[1] . If an employee receives a regular salary throughout the year, including during periods of holiday, it may not impact them as they receive the same pay each month.
Does the ruling apply to all part-time workers?
No, it doesn’t relate to part-time workers with set hours, for instance, someone who works year-round on a 2 day a week contract. You can calculate their holiday entitlement in the standard way as they will still have a minimum of 5.6 weeks off work.
What do I need to do to comply with the ruling?
If you employee people who work part-year, you should ensure that they are now being given the same annual leave entitlement as their colleagues who work the whole year, and at least 5.6 weeks of holiday per year. The only time that you can pro-rate that holiday is if a worker joins or leaves during the holiday year.
You may face claims for underpayment of wages so will need to consider whether to proactively make payments based on the new ruling. When making a claim, employees can go back a maximum of two years from the date the claim is presented so you should be aware of a liability of potentially two years of underpayment costs.
Terms and conditions, annual leave policies and holiday calculation spreadsheets may need to be amended to reflect the updated ruling so these should be reviewed to make sure that they comply.
As there are many nuances in this matter which relate to the type and length of contract, the way salary payments are organised and other matters, this is an area in which employers would be wise to get advice. ViewHR can advise on what changes you may need to make, so please get in touch for more information.
