Kinga Michnowska Associate
Supreme Court ruling changes holiday pay for many part-year workers
We are all familiar with the idea of part-time workers, but some people only work part-year, including private music teachers, examination invigilators, supply teachers, care workers, seasonal workers, bank staff, and others.
If you employ part-year workers, or are a part-year worker yourself, including under a zero-hour contract, then this highly significant Supreme Court ruling will matter to you. Many employers will now have to change their method for calculating holiday pay for some types of workers.
In the case between Harper Trust v Ms Brazel, Ms Brazel was a music teacher at Bedford Girls’ School. She worked under a permanent zero-hours contract, was required to provide her services during term-time and take her holidays during half-term breaks. Her hours were irregular, depending on the need for music lessons.
Initially, the Trust calculated Ms Brazel’s holiday pay using the Calendar Week Method. All the pay the person has earned over the past 52 weeks is added together, then divided by the number of weeks worked, excluding any weeks not worked.
In September 2011, the Trust changed the way it calculated holiday pay to the Percentage Method. It now paid Ms Brazel 12.07% of her hours worked at the end of each term, multiplied by her hourly pay.
The percentage is calculated from the standard working year of 46.4 weeks (52 weeks less the statutory 5.6 weeks annual leave entitlement), with 5.6 weeks being 12.07% of 46.4 weeks. This method was recommended by ACAS at the time.
Ms Brazel now received less holiday pay than under the previous method and in 2015 she decided to make a claim against the Trust.
The Supreme Court held that the Calendar Week Method is the correct way of calculating a part-year worker’s holiday pay. Ms Brazel was successful and recovered her holiday pay underpayments, accrued since September 2011.
Since the judgment, ACAS have changed their guidance to align with the ruling.
So, what does all this mean and how could it affect you?
Part-year workers are now entitled to the same unreduced holiday pay as full-time workers. Part-year workers will also be entitled to disproportionately more holiday pay than part-time workers who work defined hours and days each week.
Employers may now need to review their use of permanent zero-hours contracts and consider whether other types of contract or working arrangements are more suitable, such as fixed-term working or part-time contracts.
Employers also now need to keep accurate records of hours worked in order to be able to calculate the average correctly. It is important to reiterate that only weeks in which work is performed should be included. Weeks where no work is provided, but the contract continues, should not be included. This may mean going further back than one year (up to a maximum of 104 weeks), if needed.
This is an important ruling, which will affect holiday pay for many workers. We recommend reviewing your contracts of employment and policies on paid holiday entitlement.
Please get in touch with our Employment team if you need any advice or support.
Examples of the different methods for calculating holiday pay can be seen below:
An example of the Calendar Week Method
Let’s assume you work between 10 and 30 hours a week, for £15 per hour, and you have worked for 32 weeks out of 52. Let’s assume your average hours work out as 20 hours p/w over the 32 weeks. Your holiday pay will be calculated as follows:
- 20 hours x 5.6 weeks = 112 hours x £15 per hour = £1680 per annum
Note: weeks in which the worker does not work and for which they are not paid are ignored. Earlier weeks are brought into the calculation to make up the 52 weeks, going back a maximum of 104 weeks.
An example of the Percentage Method
Using the same example as before, let’s assume you worked 20 hours per week:
- 20 hours x 32 weeks = 640 hours x 12.07% = 77.25 hours of holiday
The holiday pay would now amount to £1,158.75, £521.25 less than when using the Calendar Week Method.