Administering Holiday Pay

Should holiday pay for a term-time worker with a year-round contract (a ‘part-year worker’) be calculated as 12.07% of their annual earnings? 

In Harpur Trust v Brazel the Supreme Court held ‘No’. 

Mrs Brazel was employed on a permanent zero-hour contract to teach music part time. She worked predominantly during term time. She was hourly paid and worked variable hours.  

The employment contract allowed for 5.6 weeks holiday, mirroring her statutory right. The employment contract stipulated that this is to be taken during school holidays. 

In 2011, the Respondent changed its method of calculating holiday pay for the Claimant. Mrs Brazel’s holiday pay was calculated using ACAS guidance at the time for casual workers. Rather than using an average of the previous 12 weeks’ earnings multiplied by 5.6 weeks, the Respondent calculated the pay based on 12.07% of termly earnings. However, Mrs Brazel worked on average 32-35 weeks and argued that this calculation disadvantaged her and worked out as less money and so she brought an unlawful deduction from wages claim. 

Mrs Brazel was unsuccessful in her initial claim but that was overturned by the EAT. The Court of Appeal, and the Supreme Court, agreed. 

The Trust’s arguments and suggested methods of calculation were rejected. The Supreme Court took account of the fact that there was nothing in the Part-Time Workers Regulations preventing part-time workers from being treated more favourably than someone working throughout the year. 

So how should holiday pay be calculated?  

The Supreme Court has now confirmed that the widely used12.07% method cannot be used. 
 
The prescribed correct method of calculation of weekly pay for a ‘part-year worker’ is to look at the number of hours they worked on average over the last 52 weeks, ignoring weeks not worked. (Before April 2020 and legislative changes, you had to look back 12 weeks which is why this is referenced in the Harpur Trust case.) This is a huge administrative task.  

This Harpur is not only relevant to term time workers but also those employed on zero hour contracts where they may not work some weeks of the year and may indeed result in some surprising holiday pay calculations.  

Incorrect calculations of holiday pay can result in underpayments and costly claims in the employment tribunal. Unions have already successfully pursued claims on behalf of term time staff.  

If you have workforce on term-time or zero/ variable hour contracts and you need help administering holiday calculations or reconciling potentially incorrect historic calculations then please get in touch with a member of the team.  

If you also need advice in managing holiday payments moving forwards you should also get in touch as there are mechanisms you can use to reduce holiday pay liabilities.  

We would always recommend employers are proactive, have a plan and strategy in place before a member of your workforce brings the issue to your attention. Be on the ‘front foot’.  

Contact a member of the team now 0333 2005153 or contact us by email here.