2 days ago
Holiday Pay for Part-Time Workers
When workers work part-time or do not have regular hours some employers can struggle to work out what their holiday entitlement is. A recent case from the Supreme Court has clarified how to calculate holiday pay, although it has caused employers some consternation.
All workers are entitled to a minimum of 5.6 weeks’ holiday (which includes the eight bank holidays). For someone working 5 days a week, the calculation is simple – 5.6 x 5 = 28 days holiday per annum. Problems can occur when a worker does not have a regular working pattern, including perhaps not working all year round, an example would be term time only.
To get round the difficulty of calculating how much holiday a worker is entitled to when their hours or working weeks vary, some employers would pay holiday pay equivalent to 12.07% of the hours that they worked in the holiday year, as approach was set out in ACAS Guidance booklet. The percentage of 12.07% was reached because it is the proportion that 5.6 weeks of annual leave bears to the total working year. The working year is the whole year (52 weeks) minus the annual leave (5.6 weeks) and so 46.4 weeks. 5.6 weeks is 12.07% of 46.4 weeks.
This approach was challenged by a peripatetic music teacher in the case of Harpur Trust v Brazel. Mrs Brazel worked between 10-15 hours a week during term time only, although some weeks she worked much less. She did not work during school holidays and was only paid for the hours she actually taught in term time.
Mrs Brazel’s contract said that she was entitled to 5.6 weeks’ paid holiday each year. The Harpur Trust had calculated and paid her holiday based on 12.07% of the hours she worked over the year.
Mrs Brazel claimed that the Trust should in fact calculate her holiday pay by paying a week’s pay for each of the 5.6 weeks’ holiday she was entitled to, with a week’s pay calculated as an average of her pay for the last 52 weeks which she had worked. This approach was set out in guidance published by the Department for Business, Energy and Industrial Strategy.
By using only weeks she had worked, those weeks when she had not worked and received no pay would not be taken in account. The result would mean increased holiday pay.
The Supreme Court found that to calculate a week’s holiday pay, employers should take an average of the pay for the last 52 weeks worked (even if that was more than one calendar year ago) and ignore the weeks not worked. For newer workers who had not been working for more than 52 weeks, an average of their actual weeks worked should be used. Addressing the fact that this would lead to a part-year worker receiving disproportionately more paid leave than other workers, the Court said that the law does not prevent a more generous provision being made.
As an extreme example of the implications of this case, a worker on a zero hours contract but who only works one 40 hour week each year would be entitled to 5.6 weeks’ holiday pay calculated as 40 hours for each of those 5.6 weeks. (Clearly in this case, the worker would not be engaged on a permanent contract to avoid this result.)
To avoid future claims for underpayment, any employer who has previously calculated holiday pay based on 12.07% should no longer use that method. You should seek advice if you are unsure how to calculate holiday pay or if you need your contracts of employment updated to reflect the correct method of calculation.