February 14, 2023
The Supreme Court’s decision in Harpur Trust v Brazel (2022 UKSC21) has led to concern and uncertainty surrounding the calculation of holiday pay for those who work irregular hours and has created significant anomalies in paid holiday entitlement.
As a result of the decision, it is estimated that between 300,000-500,000 permanent term time and zero hours contract staff will receive more holiday entitlement. Approximately 37% of these workers are engaged in the education sector. Many agency workers are also likely to be affected.
Workers on permanent contracts who work for a few weeks a year will receive the highest increase in holiday pay disproportionate to the hours actually worked.
Employers are also concerned about the risk of claims for backdated holiday pay in cases where the incorrect amount has been paid.
Mrs Brazel was engaged by a school run by the Harpur Trust as a visiting music teacher. She only taught during term time and she was only paid during term time. She is what is known as a “part year worker”.
Under the Working Time Regulations (WTR), all workers are entitled to 5.6 weeks’ paid holiday a year so, for example, if a worker works 2 days a week they will be entitled to 2 x 5.6 which is 11.2 days.
Where a worker’s hours vary from week to week (as Mrs Brazel’s did) s.224 Employment Rights Act 1996 provides that a week’s pay is the amount of the worker’s average weekly pay calculated over the previous 12 weeks*
It also states that in arriving at the average weekly pay, no account shall be taken of a week in which no pay is payable and you have to go back further than 12 weeks to the last week in which pay was payable. Therefore if a worker has a week when they were not working or a week when they did not receive any pay that week does not count in arriving at the average weekly pay.
*Since April 2020, holiday pay has been calculated on the basis of an average over the previous 52 weeks, not 12.
In the case of Harpur Trust V Brazel, The school calculated her paid holiday entitlement using the 12.07% method of calculation. However, when they applied that formula to Mrs Brazel it meant that her holiday pay was based on an average that included the weeks during the school holidays (when she wasn’t paid) rather than ignoring those weeks when she received no pay. Using the 12.07% method resulted in her holiday pay being £705 lower over the course of the year.
The Supreme Court had to decide Mrs Brazel’s entitlement to annual leave and how much pay she should be paid when she took holiday.
The Court held that under the WTR, holiday entitlement for part-year workers should not be pro-rated so that it is proportionate to the amount of work they actually perform each year. Instead, the Court held that part-year workers on permanent contracts should receive 5.6 weeks of annual leave and that their holiday entitlement should be calculated using a 52-week holiday entitlement reference period.
Following the judgment, part-year workers are entitled to a larger annual paid holiday entitlement than part-time workers who work the same number of hours across the year but work fewer hours each week consistently across the year. This anomaly is demonstrated below.
Comparison of Holiday Entitlements for Part-Year and Part-Time Workers
|Katy Part time Worker||Thomas Part-year Worker|
|Weeks in employment||52 weeks||52 weeks|
|Statutory Holiday||5.6 weeks||5.6 weeks|
|Weeks Worked||46.4 weeks||30 weeks|
|Hours Worked||696 hours||696 hours|
|Average Length of Week (all weeks including non- working)||696 hours /52 weeks = 13.38 hours||696 hours /52 weeks = 13.38 hours|
|Holiday Entitlement (only weeks worked)||(696 hours/ 46.4 ) x 5.6 = 84 hours holiday||(696/30) x 5.6 = 130 hours holiday|
|Holiday Entitlement (all weeks including non working) |
Government’s Proposed Approach
|696 x 12.07% = 84 hours holiday||696 x 12.07%= 84 hours holiday|
|Katy is a part-time worker who has been employed for a year. Her employer wants to calculate her holiday entitlement for the holiday year using a 52 week reference period. She receives 5.6 weeks statutory annual leave entitlement and works an average of 15 hours a week, excluding holidays. Over the last year, she worked 696 hours. Using a holiday entitlement reference period, she is entitled to 84 hours of holiday equivalent to 5.6 weeks, each 15 hours in length|
|Thomas is a part-year worker who has been employed for a year. Over the past year, he also worked for 696 hours, although he only worked in 30 weeks of the year for an average of 23.2 hours each week. Under Harpur Trust v Brazel, his annual leave entitlement would be calculated using a 52 week reference period based on an average of how much he worked excluding those weeks when he did no work. Although he worked the same number of hours in the year as Katy, he would receive a larger annual leave entitlement and holiday pay of 130 hours equivalent to 5.6 weeks each of 23.2 hours in length.|
The WTR also do not set out how to convert this into entitlement in days or hours for workers with irregular hours. Current Government guidance suggests that employers may wish to calculate average days or hours worked each week based on a representative reference period, although the WTR do not expressly provide for this. In all cases, employers must ensure that each worker receives at least 5.6 weeks’ annual leave per year.
The Government has published a consultation paper on proposals to introduce regulations to clarify the calculation of holiday entitlement for part year workers and those working irregular hours. The Consultation closes on 9 March 2023 and a link to the Consultation Paper can be found here
Our HR support services can help you ensure that holiday pay and entitlement is calculated correctly. As employment law specialists it allows us to use our expertise to put your business in the best position to protect both the employer and employee.
If you’re looking for help with HR services, don’t hesitate to get in touch.