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Legal ruling changes holiday pay for permanent part-time workers

The Supreme Court passed down a judgment which means permanent part-time workers that work irregular hours or part of a year, are now entitled to full-time paid holiday allowance.
Marie
03/08/2022

Recruitment businesses dealing with permanent part-time workers that work irregular hours or part of a year need to be aware of a recent legal ruling on holiday pay.

On Wednesday July 20 the Supreme Court passed down a judgment which means permanent part-time workers that work irregular hours or part of a year, such as teachers and seasonal workers, are now entitled to full-time paid holiday allowance. This potentially leaves the door open for staff to make claims of underpayment from their employers.

In this blog, we will cover the facts of the case and the implications for businesses hiring employees on irregular working patterns.

What was the legal case?

The Supreme Court upheld a decision by the Court of Appeal which found in favour of Ms Brazel, a part-time music teacher employed by Harpur Trust, which operates Bedford Girls’ School.

Although Ms Brazel was employed on a permanent contract, this was only during term time (32 weeks of the year) and her hours varied each week. The Trust had a policy meaning every employee was allowed 5.6 weeks of leave per year, commonly referred to as the ‘calendar week method’.

In reality, teaching staff do not work for extended periods during school holidays, meaning they exceed their allocation of leave.

The problem started in 2011 when the Trust changed the way it calculated holiday pay to a percentage method. It multiplied the hours worked by 12.07% and then multiplied the figure by her hourly rate of pay. The final sum was then reimbursed as holiday pay.

Ms Brazel complained as she now received less paid holiday than before. She said she was entitled to 5.6 weeks’ paid holiday per year – the minimum as set out by the Working Time Regulation (WTR). The Trust argued that the new method was in accordance with Acas guidelines on casual workers.

Ms Brazel took her claim to an employment tribunal in 2016 for unlawful deduction of wages. One example given stated that she had taken 1.87 weeks of holiday over the Easter break in 2013. The Trust paid her £452.20 using the percentage method, but the calendar week method produced a figure of £687.26.

After the employment tribunal in Bury St Edmunds dismissed her claim, Ms Brazel successfully appealed the decision. The Trust then appealed, but was ultimately unsuccessful in both the Court of Appeal and Supreme Court.

What was the judgment?

In a unanimous verdict, the Supreme Court justices found that the Trust’s new method of pro-rating holiday pay to account for weeks not worked was unlawful. While the Trust had suggested other ways of determining holiday pay for part-time staff, the Court felt these were “extremely complicated”.

The court confirmed the entitlement to 5.6 weeks’ holiday applies to full and part-year workers, without pro-rating. For staff with no normal working hours, pay should be calculated by reference to the hours worked over a 52-week average, rather than limited by the number of hours the worker has worked.

The Supreme Court stated:

  • EU law did not require holiday entitlement to be pro-rated in all circumstances. UK law did not make any provision allowing for pro-rated holiday entitlement for part-year workers.
  • Alternative calculations proposed by the Trust were fundamentally inconsistent with the legislation.
  • The Trust’s argument that a part-year worker’s holiday pay would be a higher percentage than full or part-time workers was not well founded.
  • There was no justification that the Trust simply followed Acas guidance, as this cannot “affect the proper construction of the statutory wording”.
  • The judgement only applies to employees and workers. It does not apply to genuine independent contractors.

What does this mean for employers?

The case means that holiday for permanent part-time workers who work irregular hours or part of a year is set at 5.6 weeks per year and holiday pay should be calculated based on average earnings over 52 weeks, not the hours worked.

Lorraine Laryea, Recruitment Standards Director at the Recruitment & Employment Confederation (REC), said: “Recruitment businesses that use an employment model to engage their temporary workers, or work with an umbrella company, will be immediately affected.

“Employers in this situation should review their current contractual arrangements and assess their potential liability to back pay holiday pay. The method of calculating holiday entitlement and pay will also need to be amended in accordance with the Supreme Court’s decision. The judgment very clearly addressed the position of a part-year worker engaged on a full contract of employment, and while this is not the type of contract used by the majority of agencies for their temporary workers, the REC will nevertheless be reviewing our template contracts in light of the decision.”

Laryea added: “The case highlights the difficulty of applying the Working Time Regulations to non-standard working patterns and adds weight to our argument for a review of the holiday pay legislation to meet modern working practices.”

Need advice?

If you would like advice on the holiday pay ruling, call our experts on 0845 606 9632 or email hello@recruitmentaccountants.com.

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