Part year workers — how should leave be calculated?
The much anticipated Supreme Court decision in the case of Harpur Trust v Brazel: clarity for employers
Mrs Brazel was (and remains) a visiting music teacher at a school run by Harpur Trust (“the Trust”) from September 2002. She was engaged on a permanent contract; she worked irregular hours during term time and was paid for hours worked. During school holidays, she was not required to work at all. Essentially, she was a part-year worker.
Mrs Brazel’s contract provided that she was entitled to 5.6 weeks’ paid leave per annual leave year.
The Calendar Week Approach: Prior to September 2011, Mrs Brazel was treated as taking her annual leave in three equal tranches in the winter, spring and summer school holidays. As a result, 1.87 weeks of each school holiday was treated as annual leave for which Mrs Brazel was entitled to be paid. In accordance with s224 Employment Rights Act, Mrs Brazel’s annual leave was calculated by taking her average pay in the twelve term-time weeks prior to the school holiday and paying her 1.87 times that weekly average.
The 12.07% Approach: From September 2011, the Trust adopted the 12.07% Approach to calculate Mrs Brazel’s holiday pay. The 12.07% Approach calculated annual leave entitlement on the basis that 5.6 weeks is equivalent to 12.07% of hours worked over a year (5.6 weeks’ holiday, divided by 46.4 weeks (being 52 weeks – 5.6 weeks) multiplied by 100 = 12.07%). The Trust said that the 12.07% Approach was in accordance with ACAS Guidance in force at that time.
The Trust’s change of approach in 2011 had the effect of Ms Brazel receiving less annual leave entitlement than she had previously received. Ms Brazel brought proceedings for unlawful deductions from her wages by underpayment of her entitlement to holiday pay.
The issue for the Supreme Court
By the time the case came before the Supreme Court, the key issue for determination was whether a part-year worker’s leave entitlement should be pro-rated (i.e. calculated proportionally to the number of weeks actually worked) or whether their entitlement to annual leave should be calculated ignoring those weeks.
The Supreme Court concluded that the amount of leave to which a part-year worker is entitled should not be pro-rated to that of a full-time worker.
The Calendar Week Method should be used to calculate the leave entitlement for part-year workers.
The Supreme Court accepted that this approach put Mrs Brazel in a more favourable position than some full-time workers in the sense that she was entitled to a proportionately greater leave requirement than full time workers. However, this construction was permitted by EU law and required by national law.
The Supreme Court’s judgment has been eagerly anticipated, because we now have clarity on the calculation of holiday pay for employers who permanently engage workers on irregular hours.
For those employers who continue to calculate part-year workers’ annual leave entitlement using the 12.07% Approach, they will have to consider and revisit their practices of calculating holiday pay. Based on this judgment, these employers may face claims from affected workers in respect of underpaid holiday pay. Indeed, employers who have used this approach in the past may now face backdated claims for unpaid holiday pay.
Alternatively, employers who employ workers who work irregular hours on permanent contracts may want to reconsider whether to continue to use permanent contracts at all.
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