Term Time Working and Holiday Entitlement

The Supreme Court has confirmed that employees who only work for part of the year are entitled to the same holiday as colleagues who work all year

Term Time Working and Holiday Entitlement. The UK’s Supreme Court has confirmed that employees who only work for part of the year are entitled to the same holiday as colleagues who work all year. This means their holiday entitlement should not be pro-rated to reflect their actual hours of work, even though this means that they get proportionately more holiday than full time workers or typical part time workers.

Government Consultation on Holiday Entitlement Launched
The Government has launched a consultation on the calculation of holiday entitlement for part-year and irregular hours workers.

This follows the Supreme Court’s recent decision in Harpur Trust v Brazel, which provided that holiday entitlement for permanent part-year workers should not be capped at 12.07% of their annualised hours or pro-rated so that it is proportionate to that of a full-time worker – even though this would entitle part-year workers to a higher holiday entitlement in comparison to part-time workers who work the same total number of hours across the year.

Read more about the government consultation and respond to the consultation.

Background

Mrs Brazel was a term-time only music teacher who was engaged on a permanent employment contract. She was paid an agreed hourly rate for the hours she worked in the previous month. She only attended the school when she was required to provide lessons, so she had no set number of working hours. Her hours were dependant on the number of pupils who were learning to play instruments that term. She did not work during school holidays. Her holiday entitlement and pay were calculated on a pro-rata basis based on her working 39 weeks per year rather a whole year of 46.4 weeks (52 weeks less 5.6 weeks of holiday).

Mrs Brazel, argued that she lost out after the school she worked at changed the way it calculated her holiday pay in 2012. It calculated her earnings at the end of each term, took 12.07% of that figure, then paid Brazel her hourly rate for that number of hours as holiday pay. That 12.07% is the proportion that 5.6 weeks of annual leave bears to the total working year of 46.4 weeks.

This method of calculating casual workers’ holiday pay is widely used and was recommended in ACAS guidance, which has since been re-written.

However, Brazel claimed this method was not compliant with the working time regulations. She believed that holiday pay should be calculated by taking the average weekly remuneration for the 12 weeks prior to the calculation date and multiplying it by 5.6. (Note: the 12-week period for calculating average pay has since been extended to 52 weeks.)

Brazel brought a claim before the Employment Tribunal for unlawful deductions from her wages by underpayment of holiday pay.

The Tribunal Decisions on Term Time Working and Holiday Entitlement

In 2015 an employment tribunal dismissed her case, ruling that the Harpur Trust had applied the correct method of calculating holiday pay.

Brazel then appealed to the Employment Appeal Tribunal, where the Judge agreed with her.

The Trust then appealed to the Court of Appeal in 2019, which found that the working time regulations did not require leave entitlement for term-time workers to be who reduced pro rata. It said that holiday pay should be calculated using average earnings over a 12-week period.

The Supreme Court Decision on Term Time Working and Holiday Entitlement

The question for the Supreme Court was whether she was entitled to the full statutory holiday entitlement of 5.6 weeks’ holiday a year, paid at her average weekly rate, or whether her holiday entitlement should be reduced to reflect the fact that she only worked during term time. If her holiday was not reduced, she would receive proportionately more holiday than other employees in relation to her actual hours of work. The Harpur Trust argued that as a matter of EU and domestic law, holiday entitlement should be calculated by reference to periods of actual work.

EU law remained relevant to the case, which started before Brexit.

Yesterday, 20 July 2022, the Supreme Court unanimously ruled in Brazel’s favour and found that she should receive the same holiday entitlement and pay as staff who work all year round.

The Trust had proposed numerous alternative calculation methods and the Supreme Court identified multiple problems with them, stating they were directly contrary to the statutory method set out in the working time regulations. It said its methods would require employers to keep detailed records of every hour worked, even if employees were not paid an hourly rate.

Turning to the proper construction of the Working Time Regulations (the Regulations), the Supreme Court did not accept that they could or should be interpreted to reflect the EU law principle. Although the Regulations require weeks during which an employee does not work to be ignored when calculating their average weekly pay, they do not contain a similar provision requiring such weeks to be ignored when calculating their entitlement to annual leave. Employers are required to calculate holiday for full time, part time and part year employees on a consistent basis. The Regulations do not permit an employer to reduce one employee’s holiday entitlement to ensure that is a proportional to that received by others.

Although the Harpur Trust had put forward various other methods for calculating holiday that it said would be consistent with the EU law principle, the Regulations reflect a policy choice by Parliament as to how holiday entitlement should be calculated and paid. The fact that this may result in some workers with atypical working patterns having a slight advantage over other workers is not so absurd as to justify the wholesale revision of the existing statutory scheme.

Comments on Term Time Working and Holiday Entitlement

As a result of the decision, employers with staff who do not work throughout the year, but who are covered by a contract even when they are not working, may need to revisit how much holiday they give such staff. Although this has been an issue for employers since the EAT decision in this case, some employers have maintained their existing approach to holiday entitlement pending the Supreme Court’s decision. It is now clear that calculating a term time worker’s holiday by reference to their actual hours of work is not compliant with the Regulations in their current form.

This will have a significant financial impact for employers with people working part of the year on permanent contracts, which are most commonly used in off-shore oil rigs and the education sector.

If you have part year workers and haven’t amended your calculations you will need to give thought to how far back a particular worker may be able to claim in respect of historic underpayments. But generally, where a worker brings an unlawful deduction from wages claim based on a series of deductions from an ongoing pattern of incorrect holiday payments, an employment tribunal can only look back at the two years preceding the unlawful deduction from wages claim being brought.

Case ref: Harpur Trust v Bazel

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