Holiday pay calculation for term-time only and other ‘part year’ workers
A case law update on the Court of Appeal’s decision in Brazel v The Harpur Trust, providing practical guidance on calculating holiday pay for workers
The Court of Appeal has handed down a decision on an appeal brought by an employer, after an employee successfully challenged the way her holiday pay was calculated. The claimant, Mrs Brazel, was a term-time only worker on a zero hours contract. Not only did her hours vary through the year — she did not work during school holidays — but also week to week during term times. The Court of Appeal describe her as a ‘part year’ worker.
What was the case about?
All UK workers are entitled to 5.6 weeks of paid holiday per year. However there has been a huge amount of reported case law which deals with the deceptively simple question of how much pay a worker should receive for each of their 5.6 weeks of holiday. For those working the same hours per week all year round and receiving the same pay each week or month, there’s no need to make a calculation — these workers will get the same amount in their regular pay packet whether they’ve been on holiday or not. Unfortunately such people are no longer representative of the workforce — the workforce now includes seasonal workers, term-time only workers, workers whose pay varies with bonuses or commission and zero hours workers who don’t work every week or the same hours every week.
The facts
Mrs Brazel was — and still is, as she still works for the employer — a clarinet and saxophone teacher in a school. She was on a permanent contract, but it was also zero hours. She only worked term times, and during each week of the school term she worked varying hours — at the start of each term she tended to give fewer lessons than towards its end. She was paid at an hourly rate, and paid at the end of the month for any work she had done in the previous month.
Each year total term time varied between 32 and 35 weeks, giving total school holidays of between 18 and 15 weeks.
In order to give Mrs Brazel her paid holiday, the school’s approach was to say that of the 18 or 15 weeks school holiday, 5.6 weeks was paid — but they didn’t specify which, it just fell somewhere within the other unpaid weeks off. In line with this, Mrs Brazel received three payments, every 4 months, representing an amount of paid holiday. The school used a calculation where it added up the total number of hours she’d worked in the previous 4 months, and added an extra 12.07% of pay to the total amount she had earned.
This was on the (correct) basis that 5.6 weeks of paid holiday is equal to 12.07% of the remaining 46.4 working weeks in the calendar year. This is a widely-used method where workers’ hours fluctuate.
Mrs Brazel did not agree with this. The Working Time Regulations 1998 say that where a worker does not have ‘normal working hours’, holiday pay should be calculated by taking an average of the hours worked, and the pay received, in the 12 weeks prior to the first day of the worker’s holiday. If this method was used, she would receive more holiday pay, although the difference was relatively insignificant. She lost that argument in the tribunal, appealed to the Employment Appeal Tribunal and won, and the school appealed to the Court of Appeal.
The school was adamant — its 12.07% calculation gave her a proportion of annual pay equivalent to 5.6 weeks’ pay. If the Court approved Mrs Brazel’s method, she would get a greater amount of paid holiday, proportionately, than a worker who whose hours were the same every week, amounting to 17.05% of hours worked per term.
Mrs Brazel said, effectively, ‘so what?’ The Regulations give a method of calculation based on the previous 12 weeks’ average pay, and that was that; if this gave her more paid holiday proportionately, there was nothing in law to say that this wasn’t allowed.
The Court of Appeal agreed with her, and dismissed the school’s appeal. Regulations 16 and 16A of the Regulations give all workers 5.6 hours per week, and refer to s224 of the Employments Rights Act 1996 where, for workers without normal working hours, a weeks pay is calculated as an average of the last 12 weeks pay worked before the first day of the holiday. If that gives a windfall to some permanent, part-year workers, so be it.
Comment
The Court of Appeal’s decision is undoubtedly right, and yet it has disapproved of a method of calculating holiday pay that has been relied on by employers — and cited by Acas until now — because it is simple and easy, and broadly achieves the right result; that is, giving workers who work fluctuating hours across the year an amount equivalent to 12.07% of hours worked. The decision also has the effect of giving some of those workers a slightly higher proportion of holiday pay than regular, salaried workers. However, government guidance has been amended to follow the Court of Appeal’s ruling, as has guidance from Acas, and our opinion is that it should be followed.
Mrs Brazel benefited because she gave more lessons as each term progressed, so earned more pay in the 12 weeks immediately before the start of each school holiday — other workers might be in the opposite position where their hours decrease over the school term, and so it might be that we have to argue differently if we are faced with those facts.
But in any case the effect of the decision is likely to be short-lived — first because the school is seeking leave to appeal to the Supreme Court, and second because the Working Time Regulations, specifically their provisions that related to calculation of holiday pay, are to be amended next year, so that the period to be taken into account for calculation is to be increased to a year.
We’d caution advisers to watch out for employers varying workers’ hours or designated holiday periods to try and reduce workers’ holiday pay, and recommend seeking specialist advice in tricky cases that present themselves in the wake of the Court of Appeal’s decision. In most cases the difference between the two calculation methods will result in very small variations in pay, and, as long as the method used allows the worker to take full advantage of their right to paid time off, the ultimate aim of the legislation will have been met.
Finally, some part year workers such as school workers get paid across the year in 12 equal monthly instalments, based on a total of their regular weekly hours of work per year during term times, plus 5.6 weeks’ holiday pay. Their monthly pay is the same regardless of whether they are at work or off work during the school holidays — this decision won’t require a change to the way their pay is calculated.
Matt Bradbury is an employment expert at Citizens Advice and employment subject editor on the Adviser editorial board.
