Supreme Court sides with part-year workers – they are entitled to full year paid holiday allowance

Part-year workers are now entitled to a full year paid holiday allowance, after the Supreme Court hands down its long-awaited judgment. The Court endorsed the earlier Court of Appeal judgment meaning employers who previously pro-rated the holiday entitlement for staff working part of the year on permanent contracts will have to change their practices.

What was this case about?

It had been common practice for employers to pro-rate holidays for part-year workers – usually ‘term-time’ – for many years. It was a perfectly logical and equitable approach.
In Harpur Trust v Brazel [2022] UKSC 21, Ms Brazel was a music teacher at a school, working a variable number of hours each week during term-time. The appeal by Harpur Trust concerned the calculation of annual leave and holiday pay entitlements for workers who, like Ms Brazel, worked varying hours during only certain weeks of the year but have a contract throughout that year.

What was the background?

Before September 2011, Ms Brazel’s holiday pay for the 5.6 weeks was determined by calculating her average week’s pay in accordance with section 224 of the Employment Rights Act 1996 and multiplying that by 5.6. At that point, a ‘week’s pay’ was defined as the amount of a worker’s average weekly pay in the period of 12 weeks ending with the start of their leave period, ignoring any weeks in which they did not receive any pay (the Calendar Week Method). From September 2011, Harpur Trust – her employer – changed its approach in line with Acas guidance (now re-written) and calculated Ms Brazel’s hours worked at the end of each term, took 12.07% of that figure and paid her the hourly rate for that number of hours as holiday pay (the Percentage Method). 12.07% is the proportion that 5.6 weeks of annual leave bears to the total working year of 46.4 weeks. Harpur Trust therefore treated Ms Brazel as entitled to 12.07% of her pay for the term, reflecting only the hours she actually worked.

What was the outcome?

The Supreme Court unanimously dismissed Harpur Trust’s appeal. It ruled that the practices described breached regulations 13 and 13a of the Working Time Regulations. Where part-year workers are employed, they must now receive a full 5.6 weeks’ holiday. Employers cannot pro-rate this amount to reflect the number of weeks they actually work. The Court rejected Harpur Trust’s contention that the Calendar Week Method leads to an absurd result whereby someone working in a similar way to Ms Brazel will receive holiday pay representing a higher proportion of her annual pay than full time or part time workers working regular hours. By its judgment, the Supreme Court placed adherence to the legislative scheme and to practicability above addressing the perceived advantage to part-year workers.

How to implement this change for part-year workers

Most part-year workers follow a school year and take their leave during fixed school closure periods. If employers average the worker’s pay over 12 monthly instalments, it will increase marginally, and they’ll nominally receive a few extra days holiday but there’s no real change in their working pattern. The worker will continue to be off throughout the school holidays but now, their average monthly pay will reflect a few more days holiday.

What about holidays for part-year staff who start or leave midway through the leave year?

Employers still reduce holidays for part-year staff who start or leave during the year. They can be treated like any other starter or leaver, except this must be pro-rated based on a minimum of 5.6 weeks of holiday – even if their ‘working year’ is only 38 or 39 weeks. Following a recent change in statutory regulations, employers must also average holiday pay over the last 52 weeks actually worked e.g., ignore complete weeks in which someone’s been off sick.

Last year, the Department for Business, Energy and Industrial Strategy produced guidance to assist in calculating holiday pay. Although this predates the Supreme Court judgement, it does reflect the Court of Appeal decisions. Therefore, this guidance is still entirely relevant.

What about part-time staff?

It doesn’t affect part-time staff who work all year but on fewer days than their colleagues. Their holiday entitlement is still pro-rated.

For instance:

• Full time member of staff working all year 5 days per week = 5 x 5.6 = 28 days holiday

• Part-time member of staff working all year 3 days per week = 3 x 5.6 = 16.8 days holiday

Anything else?

Employers should consider potential unauthorised deductions claims or Working Time Regulations claims from workers paid under the percentage method and try to reach a settlement. Employers may also wish to consider whether part-year workers need to be hired on year-round permanent contracts.