Holiday pay and part-year workers

Supreme Court ruling sets out entitlement rules

Karen Farrell
Karen Farrell is an employment associate at Dentons.
What are part-year workers?

Part-year workers are workers employed on permanent contracts but who work for varying hours during only certain weeks of the year. In Harpur Trust v. Brazel, Ms Brazel was a visiting music teacher who only worked during term time and whose hours were dependent on the number of pupils requiring tuition.

What was the previous position on holiday pay for part-year workers?

Under the Working Time Regulations 1998, workers are entitled to 5.6 weeks’ paid holiday per year. It was previously thought that employers could pro-rate the holiday entitlement of part-year workers to reflect the number of hours actually worked over a year.

In Harpur Trust v. Brazel, the employer had calculated Ms Brazel’s holiday entitlement in line with the applicable (but now revoked) ACAS guidance for those working atypical hours.

This involved multiplying the earnings of the worker by 12.07% (that being the proportion that 5.6 weeks bears to the remaining 46.4 weeks of the working year).

The result of this was that Ms Brazel was entitled to less holiday pay than she would have been if the employer had calculated it based on her average earnings over the previous 12 weeks – the law has since changed to a 52-week average.

What has changed?

The Supreme Court, upholding the Court of Appeal’s decision, ruled that part-year workers’ holiday entitlement cannot be pro-rated based on the amount of work done by the worker.

It confirmed that the 5.6 weeks’ holiday entitlement applies to all workers even if they work fewer hours or days over the year. The 12.07% calculation method was rejected by the Court. (The guidance had already been removed by Acas.)

Who does it affect?

Strictly speaking, the decision only applies to part-year workers, such as the visiting music teacher example above or a permanent seasonal worker. It doesn’t apply to those not employed on a permanent contract.

The Supreme Court acknowledged that the decision may lead to some “odd results in extreme cases”. For example, an exam invigilator who has a permanent contract to work 40 hours a week for three weeks a year, earning £1,000 for each week worked, will now be entitled to £5,600 in holiday pay. The Supreme Court noted that these situations will be rare.

The decision may, however, lead to other workers with atypical working arrangements and not on permanent contracts, seeking to challenge any pro-rating of their holiday entitlement.

It remains to be seen whether such claims would be upheld.

What does it mean for employers?

Businesses who employ part-year workers should review their holiday pay calculations going forward to ensure they are compliant with the Supreme Court ruling.

In addition, those employers who have historically pro-rated holiday entitlement for part-year workers should quantify potential underpayments and be live to the risk of these workers bringing claims for unlawful deductions from wages.

Any claim for unlawful deduction of wages can currently only look back up to two years.

Dependent on their level of exposure, employers may wish to proactively deal with any underpayments, while others may simply wish to wait to see whether a claim lands at their door.


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