Recent Employment Tribunal has significant impact on the calculation of holiday for part time workers

Harper Trust v Brazel

This case went all the way to the Supreme Court, who have endorsed the earlier decisions of the Employment Appeal Tribunal and Court of Appeal in a judgment that has a significant impact on the calculation of holiday for part time workers.

Mrs Brazel was a music teacher, engaged by the Harper Trust on a permanent contract over a period of several years. She taught saxophone lessons to pupils during term time only, meaning she only worked 32 weeks per year and that her hours could vary from week to week.

Under her contract, she was entitled to the statutory minimum entitlement of 5.6 weeks’ holiday per year. Harper Trust applied this in 3 equal tranches of 1.87 weeks at the start of each Christmas, Easter and Summer holiday.

Before 2011, the approach taken by Harper Trust was to calculate her holiday pay on the basis of her average weekly pay for the 12 weeks before the relevant holiday tranche excluding any weeks in which she didn’t receive any pay and then multiply that by 1.87 weeks. (Remember, that the requirement to work out average weekly pay over 52 weeks instead of 12 weeks didn’t come in until April 2020.) The Supreme Court referred to this as the “Calendar Week Method”.

From 2011, the new approach taken by Harper Trust was to calculate her holiday on the basis of 12.07% of all hours worked in the term before the relevant holiday tranche, and then multiply that by her normal hourly rate. This approach was in line with the method endorsed by ACAS at the time and an approach that is in common use amongst many employers, particularly those who have staff on zero hours contracts. The Supreme Court referred to this as the “Percentage Method”.

The change in approach meant that Mrs Brazel received less holiday pay and so she submitted a claim for an unlawful reduction to her pay. The Employment Tribunal rejected her claim, finding that the Percentage Method was fair. However, the Employment Appeal Tribunal, Court of Appeal and Supreme Court all disagreed with this.

This ruling means that the Percentage Method i.e. the approach of calculating 12.07% of hours worked to ascertain the holiday entitlement in hours and then multiplying this entitlement by the worker’s standard hourly rate will no longer be lawful.

The Supreme Court has now ruled that holiday for workers on a permanent zero hours contract or other flexible arrangement where they have weeks with no pay or weeks where their hours go up and down should be calculated in line with the Calendar Week Method as follows:

• The worker must receive 5.6 weeks’ holiday per year (or the same number of weeks that a full time employee in the same role would receive if higher). This is because they’re engaged on a permanent contract covering the full holiday year and so, although they may only work part of the holiday year, they will be treated as though they worked the whole year.
• When the worker takes holiday, their pay must be based on their average pay over the period of 52 weeks ending immediately before their holiday excluding any weeks in which they have not been paid anything. This means that if the workers have weeks in which they receive no pay, you will need to exclude those weeks and reach back further in time to make up the 52 weeks of pay from which to take an average.

This may create a potentially unfair result. For example, you could have two workers who do 400 hours for you each year: one who does 10 weeks x 40 hours, and one who does 20 weeks x 20 hours. The first worker will receive 5.6 weeks’ holiday pay based on 40 hours’ pay per week, but the second worker will receive 5.6 weeks’ holiday pay based on 20 hours per week even though they’ve done the same amount of work for you.

If you employ anyone on a zero hours contract or under any other flexible arrangement where they have weeks with no pay or weeks where their hours go up and down, then this change may affect you. We recommend that you check your contracts, holiday policy and working arrangements urgently.

If this change does affect you, please get in touch with us to discuss the options for applying this change in the law with the least detrimental impact to your business.

In the meantime, we will shortly be sending out our invitation to our Employment Law Update on 3^rd November 2022 where we will look at this and other developments, if you would like to join our mailing list to receive an invite please let us know.