Holiday for part-year workers should be subject to pro rata reduction

By Michael Nadin – 29th July 2022

The Working Time Regulations 1998 (WTR 1998) confirm that all workers in Great Britain, including part-time workers, have a right to a minimum of 5.6 weeks’ annual leave every year.

Furthermore, workers are entitled to receive their normal pay in respect of each week of leave.

In a recent Supreme Court ruling (Harpur Trust v Brazel [2022] UKSC 21) it has been confirmed that this 5.6 weeks’ annual leave entitlement should not be reduced pro rata for “part-year workers”.  This includes any workers who are employed for the whole year but only work some weeks and not others.

Whilst it is relatively straightforward to calculate holiday pay for a worker with set hours, holiday pay for a worker with no normal working hours can be harder to calculate.

Up until now a common way of doing it is to assume that holiday entitlement accrues at the rate of 12.07% of hours worked because the standard working year is 46.4 weeks (that is, 52 weeks less the statutory 5.6 weeks holiday entitlement).  This is known as the “Percentage Method” as 5.6 weeks is 12.07% of 46.4 weeks.

Even ACAS used to recommend this approach (although it no longer does so).

Under the WTR 1998, a worker’s holiday pay entitlement is a week’s pay for each week of leave. At the time of the events in Harpur Trust v Brazel, the law stated that a week’s pay is the worker’s average weekly wages over the last 12 weeks.

Since the events in this case the law has been amended and a week’s holiday pay is now the worker’s average weekly pay over the 52 week period (or start of employment if that is less than a year) before the first day of holiday.

Under the law, any weeks in which the worker receives no pay are not counted towards the average.

In the current case Mrs Brazel was a teacher employed on a zero hours’ basis. She was only paid when she was working. During school holidays she did no work at all.

She was entitled to 5.6 weeks’ paid annual leave, which she was required to take during school holidays. As the school holidays were far longer than her holiday entitlement, she didn’t have to stipulate specific dates for holiday, but at the end of each term the school made a payment in respect of holiday pay. The holiday pay equalled 12.07% of the money she had earned during that term.

Mrs Brazel brought an employment tribunal claim for deductions from wages in respect of holiday pay, asserting that the 12.07% approach is not compatible with the calculation required by the WTR 1998.

She argued that her holiday pay should be calculated on her average earnings over the 12-week period (as per the law at the time) immediately before holiday was taken. That approach would result in her, as a term-time only employee, receiving a higher percentage of annual earnings as holiday pay. If she worked 32 weeks of the year, it would equate to 17.5% of her annual earnings.

The first tribunal that heard the case dismissed Mrs Brazel’s claims but she appealed.  The employment appeal tribunal allowed Mrs Brazel’s appeal but this time the school appealed.  Both the Court of Appeal and the Supreme Court upheld Mrs Brazel’s claim.

The school argued that it was unfair for Mrs Brazel to receive higher holiday pay than a full year worker and using the following hypothetical examples:

1. The infrequent worker, such as an exam invigilator, who works three 40-hour weeks each year. Under the Calendar Week Method they would receive 5.6 weeks of holiday, with a holiday pay entitlement of nearly twice their annual earnings; and
2. The “Transitioning Down” worker, who works (say) five days a week for the first half of the year, and then one day a week for the second half. They take all their holiday at the end of the year, but their holiday pay under the Calendar Week Method (based on their last 12 weeks’ earnings) is only 5.6 days’ pay, which does not reflect the work done in the first half of the year.

The school argued that their previous method of calculating holiday would avoid these injustices.

However, the Supreme Court ruled that the method of holiday calculation used by the school was incompatible with the law as written. The court accepted that this could potentially result in unfair or even absurd results (and that Parliament was unlikely to have intended such results).  However it is a court’s job to interpret and uphold the law, not write it.

The result is that the Percentage Method of calculating holiday pay has been comprehensively rejected by the Supreme Court and should no longer be relied on.

It is worth noting that, since the reference period for holiday pay increased from 12 to 52 weeks in April 2020, some of the unfair or absurd scenarios exposed in this case are no longer applicable.

The longer reference period means that holiday pay now more accurately reflects pay levels across the whole past year.

If you need any assistance in calculating holiday pay for part time or part year employees please contact DFA Law and we will be able to assist.