The Supreme Court has ruled that employees that work for part of the year are entitled to the same holiday as those that work all year.
In Harpur Trust v Brazel, a music teacher who was employed to work term time only brought a claim for unlawful deduction of wages. Brazel argued that the method used to calculate her holiday pay on a pro-rata basis was in breach of legislation. In the long-awaited judgment, the Supreme Court upheld the Court of Appeal’s decision that employees that work part of the year should be entitled to the same holiday as those that work all year.
This decision will have far-reaching implications for businesses that employ workers who work for part of the year under a permanent or continuous contract with irregular hours, such as zero-hours, term-time only or seasonal workers. Employers will be unable to use the percentage method, i.e. 12.07% of hours worked, to calculate holiday pay for variable hours workers.
You can read the full judgment here: Supreme Court judgment – Harpur Trust v Brazel
Background of Harpur Trust v Brazel
Brazel started working for Harpur Trust in September 2002. Brazel was employed on a zero-hours contract as a music teacher. During the school terms, Brazel worked different hours each week, depending on the number of pupils that required lessons. During the school holidays, Brazel was not required to work.
Brazel was entitled to 5.6 weeks of annual leave per year, which she was required to take during the school holidays.
Originally, Brazel’s holiday pay was calculated as an average of her earnings during the 12 weeks prior to her annual leave, ignoring any weeks when she didn’t work. In September 2011, Harpur Trust introduced a new calculation method known as the ‘percentage method’. This followed ACAS guidance at the time, which stated that ‘12.07% is the proportion that 5.6 weeks of annual leave bears to the total working year’.
Harpur Trust calculated Brazel’s hours worked at the end of each term, then took 12.07% of that figure and paid her the hourly rate for that number of hours. The new method of calculation had the effect of reducing Brazel’s holiday pay.
Supported by UNISON, Brazel brought a claim for unlawful deduction of wages, arguing that Harpur Trust’s calculation method was in breach of the Working Time Regulations 1998 and the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000.
Lower court ruling
In 2015, the Employment Tribunal dismissed Brazel’s claims and stated that Brazel’s holiday pay should be pro-rated to reflect the fact that she only worked during term time rather than the whole working year. However, the Employment Appeal Tribunal overturned this decision and ruled in Brazel’s favour.
In 2019 the Court of Appeal dismissed Harpur Trust’s appeal. The Court ruled that there was no justification for departing from the clear statutory wording, i.e. that Brazel should be paid a week’s pay for each of the 5.6 weeks’ leave to which she was entitled, calculated using the average of the preceding 12 weeks’ pay.
The Supreme Court ruling
In July 2022, the Supreme Court unanimously affirmed the decision of the Court of Appeal, stating that the decision was a matter of statutory interpretation. The Supreme Court held that there were no provisions within the relevant legislation to pro rata the leave of a part-year worker.
The Supreme Court rejected Harpur Trust’s alternative calculation methods, stating they were in breach of the Working Time Regulations.
Furthermore, the Supreme Court dismissed Harpur Trust’s argument that the calculation would lead to an absurd result, with Brazel being entitled to a proportionately greater leave requirement than full-time or part-time workers with regular hours. The Supreme Court stated that ‘we do not regard any slight favouring of workers with a highly atypical work pattern as being so absurd as to justify the wholesale revision of the statutory scheme‘.
What does Harpur Trust v Brazel mean for employers?
For many businesses, this ruling may seem illogical as it means a part-year worker is entitled to the same annual leave and pay as a full-year worker. However, unless there is a change in legislation, the law in this area is now settled, and there is no further course of appeal.
Therefore, part-year workers will be entitled to a minimum of 5.6 weeks of annual leave, and their holiday pay will be calculated using the average of the preceding 52 weeks’ pay.
Who does this apply to?
This judgment applies to employees and workers who work for part of the year under a permanent or continuous contract with irregular hours, such as term-time only workers, seasonal workers, bank staff, zero-hour contracts and workers engaged under umbrella contracts. As a result, this ruling is likely to significantly impact the following industries: education, health and social care, hospitality, retail, manufacturing and recruitment agencies.
How should holiday pay be calculated for part-year workers?
Harpur Trust v Brazel has confirmed that the percentage method should not be used for calculating part-year workers’ holiday pay.
Regulation 16 of the Working Time Regulations states that for workers with atypical hours, holiday pay should be calculated as the average earnings of the preceding 52 weeks’ pay (the reference period has been extended from 12 weeks). Any full weeks in which no pay was earned should be disregarded.
Are there any exceptions?
Harpur Trust v Brazel confirmed that statutory annual leave and pay cannot be pro-rated for part-year workers. However, employers that offer additional annual leave may choose to pro-rate non-statutory leave, although this may result in a complex calculation for payroll.
Furthermore, the Working Time Regulations allow employers to pro-rate statutory annual leave in an employee’s first and final year of employment to reflect the amount of time employed. Leave is accrued at a rate of 1/12th per month. Similarly, the annual leave of a fixed-term worker can be pro-rated according to the duration of the contract.
What should employers do as a result of Harpur Trust v Brazel?
Employers should assess whether they are using the correct method for calculating annual leave payments. Where an incorrect method for calculation has been used, this should be corrected, and impacted employees should be communicated with.
We will likely see a significant increase in employment claims for unlawful deduction of wages relating to annual leave payments for part-year workers. Employers would be wise to assess their potential liability by analysing whether any current or previous workers have been underpaid and, if so, by how much. While there are some exceptions, claims are generally capped at two years’ back pay. A claim needs to be brought within three months of the last deduction.
What can employers do in future?
Employers should carefully consider how part-year workers are employed. For example, you may choose to engage workers on:
- Temporary contracts to cover the specific period of time that they work; or
- Contracts with regular hours of work
However, the nature of the employment contract must be genuine and properly reflect the employment relationship between the employer and worker.
What can we do to help?
If you would like advice on how the ruling in Harpur Trust v Brazel may impact your business, please get in touch with our team on 0330 223 5253 or office@fitzgeraldhr.co.uk. We would be delighted to help you.
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