Holiday pay for part year workers

STOP PRESS – Permission to appeal the decision of the Court of Appeal in the case of Brazel v. The Harpur Trust has been granted

We understand that, on 19 June 2020, the Supreme Court granted The Harper Trust leave to appeal the 2019 decision of the Court of Appeal (CA) in the case of Brazel v. The Harper Trust, a judgment which has had significant ramifications for schools.

In summary, the CA held that using the calculation method of 12.07% as a way of calculating holiday pay for someone who does not work throughout the whole year (i.e. a ‘part-year worker’) is unlawful because it results in the individual receiving a pro-rated amount of the statutory 5.6 weeks holiday (which is not permitted by the Working Time Regulations 1998).

In order to calculate holiday pay for part-year workers, the CA determined that, at the time holiday is to be taken, employers should identify ‘a week’s pay’ in accordance with the Employment Rights Act 1996 and multiply that figure by 5.6.

When calculating a week’s pay for an individual with no normal working hours, an employer is required to average hours worked in the reference period of 52 weeks prior to the holiday being taken (discounting any weeks in which no pay is received because the individual did not work (including school holiday periods)).

In reaching this decision, the CA acknowledged that this would result in Mrs Brazel (and other part-year workers) receiving holiday pay representing a higher proportion of their annual earnings than full-year workers. It did not consider that this was obviously unfair.

Further details on the CA’s judgement are available here.

This decision has a significant impact on schools, given the number of staff who work irregular hours over part of the year; for example, zero hours music teachers, sports coaches and exam invigilators. It had been commonplace for schools to calculate holiday pay for such staff based on the 12.07% multiplier.

The decision also impacts on other permanent, term time only workers because it applies equally to a situation where a term time only member of staff’s salary is calculated as a pro-rated element of a year round member of staff’s salary. This is because by pro-rating the salary, the holiday pay is also effectively pro-rated.

For a comprehensive practical guide on holiday for part year workers and the impact of the CA’s decision on schools, please read our advice note which is available here.

Impact of appeal to the Supreme Court

Now that permission to appeal has been granted, the case will be listed for a hearing, which (in normal circumstances) would typically take place in four to eight months’ time. However, given the backlog of hearings as a result of the Covid-19 pandemic, this timeframe may well be extended.

Any claim brought by a claimant in respect of the same legal issue is likely to be stayed pending the decision of the Supreme Court.

If The Harpur Trust is ultimately successful in its appeal, the principle of pro-rating the 5.6 weeks’ holiday entitlement for those who work part of the year could be reinstated. If, however, the appeal is unsuccessful, schools who are currently continuing to use the 12.07% multiplier, will need to change their practices.

In the meantime, schools should seek specific legal advice in respect of the calculation of holiday and holiday pay for part-year workers, particularly in the light of the pending appeal.