Voice on… Employment law, by Nicola Mullineux, HR-inform, provider of CIPD’s employment law helpline. 

Following a long-awaited Supreme Court judgment, some employers will need to review their annual leave practices after common calculation methods were declared unlawful in Harpur Trust v Brazel. The CIPD invited HR-inform to give its legal perspective on the case. 

This case involved a specific set of circumstances. The claimant was engaged on a permanent contract, working during term time only on a zero-hours basis. This arrangement may be more commonly seen in education than in other sectors, but the decision will affect those outsides of schools who work on a similar basis. 

The phrase ‘part-year’ was used in this case to describe the nature of the claimant’s work – as a term-time only worker, she did not work every week of the year. As well as term-time only, ‘part-year’ covers those who are employed to perform a task in a single block of a few days, weeks, or months. An exam invigilator who works for a couple of weeks during the exam period is another example. 

Importantly, the claimant was on a permanent contract that did not end at the conclusion of the school year and reignited for the new school term. Other atypical workers such as zero-hours or variable hours workers are also affected. 

Facts of the case 

The claimant’s annual leave entitlement was 5.6 weeks per leave year which she took outside of term time. To calculate her holiday pay, the school worked out 12.07% of the hours worked each term and paid her at her hourly rate for those hours. 

Brazel made a claim to an employment tribunal for an unlawful deduction, asserting that she should be paid based on her average pay over the 12 weeks prior to the time she took holiday (as was required by the Working Time Regulations 1998 (‘the regulations’) at the time). If she were paid in this way, she would have received more holiday pay. 

Supreme Court decision 

On the holiday pay point, the Supreme Court confirmed that the regulations do not allow for holiday pay to be calculated using the 12.07% method. They require a week’s pay to be calculated by identifying the average pay over the previous 12 weeks in which work was done. Brazel’s claim was therefore successful on this point. 

It must be noted that, since Brazel’s claim was made, the reference period in the regulations over which the average must be calculated has increased to 52 weeks. 

The court also considered whether holiday entitlement for a part-year worker can be reduced on a pro-rata basis with reference to the amount of time worked. It found that it could not, despite that this means a part-year worker will be treated more favourably than a full-time worker in the amount of holiday pay received. It is unlawful to treat part-time workers less favourably than full-time workers just because they work part-time. But there is no prohibition on treating them more favourably than full-time workers. 

What does this judgment mean? 

Employers with part-year workers should ensure that they are getting 5.6 weeks of annual leave per leave year. A term-time worker working 39 weeks a year may traditionally have been entitled to around 4.7 weeks of leave under the pro-rata method. This should now be uplifted to 5.6 weeks.

Employers who calculate annual leave entitlement for zero-hours or similar workers using the 12.07% method should no longer do this, nor should they calculate holiday pay using 12.07% of hours worked. Such workers are entitled to 5.6 weeks of leave and holiday pay should be the average pay received over the previous 52 weeks in which work was done. For some employers, this could mean a considerable increase in holiday pay payments. 

Is a pro-rata reduction of holiday entitlement ever allowed? 

Yes. Holiday entitlement can be reduced on a pro-rata basis for part-time workers who work every week of the year. For example, someone who works 3 days a week will receive a minimum of 16.8 days of leave per year (3 x 5.6). 

Holiday entitlement can also be pro-rated for fixed-term staff proportionate to the length of their contract. 

Workers who start a job, or leave employment, part way through a leave year can have their holiday entitlement pro-rated to the length of their employment in that leave year.