The law on holiday pay is forever evolving and in the most recent case on the matter, the Court of Appeal had to consider whether the holiday entitlement of part-year workers on permanent contracts should be prorated to that of full-year workers to reflect the fact that they do not work throughout the year.
Every worker in the UK is entitled to a minimum of 5.6 weeks’ paid annual leave under the Working Time Regulations 1998 however difficulties often present themselves in respect of those individuals who engage in non-standard work. In Harpur Trust v Brazel , Mrs Brazel worked term time only and her employers sought to cap her entitlement to annual leave at 12.07% of her annualised hours arguing that her annual entitlement to leave should be less than 5.6 weeks based on the fact that she did not work during the full year. The 12.07% calculation is commonly used and is reached by dividing 5.6 weeks (full-time equivalent entitlement to annual leave) by 46.4 weeks (the total number of weeks in a year less the 5.6 weeks’ holiday).
Ms Brazel, supported by UNISON, believed that her holiday pay should rather have been calculated using her average weekly earnings over the 12-week period immediately before her holiday was taken as per the provisions of the Employment Rights Act 1996 and she raised a challenge accordingly. This method of calculation would have resulted in Ms Brazel being entitled to more holiday pay than a full time worker.
Ms Brazel lost her claim at first instance on this point and on the basis that this method of calculation would see full timers at a disadvantage. Ms Brazel was however successful on appeal and the Employment Appeal Tribunal (EAT) agreed that Ms Brazel’s holiday pay should have been calculated using the 12-week averaging method. The EAT said that there was no requirement to pro-rate the leave entitlement of part-time employees (which is what the 12.07% formula achieves), whether to avoid a ‘windfall’ for term-time only workers or to avoid full-time employees being treated less favourably than part timers. The EAT recognised that this might produce anomalies such as to favour an employee in Ms Brazel’s position who didn’t work throughout the year, but in its view the legislation was unambiguous.
Ms Brazel’s employer then appealed but the Court of Appeal upheld the EAT’s decision.
This decision does produce an anomaly that those who work part time might end up receiving more for their holiday than those who work full time and employers who currently use the 12.07% formula (such as Schools and childcare providers who have term time workers) will now need to revisit their practices. This judgment is far reaching and essentially all zero-hours employees who do not work a full year must have their holiday calculated in this way and not by the application of the 12.07% formula. As a result of this judgment ACAS are revising its guidance on holiday pay and the BEIS holiday pay calculator has been removed from its website.
If you would like to discuss this case or, the implications of it then please contact a member of our Employment Law team on 01274 864999.