A recent Supreme Court case has been in the news lately and generated quite a lot of consternation on social media among employers who engage term-time or other part-year workers.
Holiday for atypical workers can be complicated at the best of times, so here are some FAQs to help clarify the position.
What was the case about?
Ms Brazel was a music teacher, engaged by the Harpur Trust, on a term-time only basis. Her holiday was based on hours actually worked, so assuming she worked 39 weeks a year, would have been 4.7 weeks’ pay.
She brought a claim against her employer saying that her holiday should not be pro rated to reflect the fact that she doesn’t work the full year, and instead she should receive 5.6 weeks’ holiday.
She lost her initial tribunal claim, but the Employment Appeal Tribunal, the Court of Appeal, and finally the Supreme Court all agreed with her, with the Supreme Court’s final ruling handed down last week.
How were people calculating holiday before?
Previously, those employers with term-time staff were reducing the 5.6 weeks entitlement so that it was proportionate to the number of weeks a year their staff members were working. So if someone working all year round got 5.6 weeks, someone only working 39 weeks would get less.
This reflected the Acas guidance and was almost universal practice.
Surely pro rating holiday makes sense? Why did the claimant win?
Yes it does seem to make sense – we obviously reduce the number of days/hours’ holiday a part timer gets, to reflect their reduced working week, so why would we not pro rata in a similar way for someone who works a reduced working year?
Ultimately, whilst the Working Time Regulations 1998 do make provision for pro rating holiday for those who work less than a full week, there is simply no provision for giving any worker less than 5.6 weeks’ holiday a year.
The only circumstances under which this can be reduced are where someone starts or ends employment without completing a full holiday year.
What about using an average?
You may wonder whether you could average out the 39 weeks over 52, and pay 5.6 weeks holiday at the averaged-out rate.
Holiday must be paid at “normal pay”. There is provision for calculating what “normal pay” is by using an average calculation. This is where someone’s pay varies week to week, either because their hours vary, or because they get different rates of pay, or commission/bonuses or similar. Average pay over the prior 52 weeks should be used to work out how much to pay someone on holiday.
However, when using the average method for your variable pay workers, you can only use the weeks they actually worked, and must go back further than 52 weeks if necessary in order to get enough data, if there are weeks the individual did no work at all. So even if your term-time worker also works variable hours each week, as indeed was the case with Ms Brazel, you would not be able to reduce holiday by averaging over the year.
What should I do for term time workers?
For term time workers it actually makes life a bit easier for employers, although more expensive. If someone works 39 weeks a year, and doesn’t take holiday during that time, you will need to add 5.6 weeks on to their pay, and therefore pay them for a total of 44.6 weeks.
For most term time workers, this amount will then be paid over a 12 month period, so that they receive pay every month.
Does it change anything for other part timers?
No. For those who work, say, three days a week all year round, they still get less holiday than their full time colleagues. They would get 5.6 x 3 = 16.8 days, which you’d round up to 17.
The easiest thing to do is remember the 5.6 weeks. However many hours or days your employees work, they get 5.6 weeks of that as annual leave.
What about zero hours workers?
This ruling may well affect zero hours workers. If you have people on zero hours contracts who are employed continuously for the whole year, but do not work every week, they will get 5.6 weeks of their normal pay (calculated using the average method above) as holiday.
Previously, many employers were using a percentage of hours worked method, so calculating 12.07% of hours worked, and that was how much holiday the person had.
Whilst it’s technically not correct, if the worker does work every week, that does come out the same as 5.6 weeks of average pay.
But if your zero hours worker doesn’t work each week, using a percentage calculation like that will not be correct, and you shouldn’t do it.
So how can I work out how much holiday to give my zero hours workers?
If you have people working variable hours and not every week, it’s hard to know what 5.6 weeks actually looks like – how much holiday do they actually have available to book? There are two methods for doing this to make it a little simpler.
- You could restrict your zero hours workers to only booking complete weeks (or one 0.6 of a week). Then, when they take a week off, at that point you look back at the prior 52 weeks (going back further if there were weeks they didn’t work), and calculate an average so that you know how much to pay them when they are on holiday. That does mean they can’t book occasional days as perhaps your full timers do, so it is less flexible. But as zero hours workers, they probably need that flexibility less than those working every day do, as they can be unavailable for shifts when they need to do something else on a certain day.
- You could, at the beginning of the holiday year, “guesstimate” how much 5.6 weeks will be for your zero hours workers, using historic data about how many hours they generally work on average. You should be able to come up with a reasonable estimate in most cases, unless the role is very new. That’s then how much holiday they have available to book. Then, towards the end of the holiday year, you recalculate based on the hours they’ve actually been working, and if the calculation is out, make an adjustment. You could do this more than once during the year.
The contents of this article are meant as a guide only and are not a substitute for professional advice. The authors accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.