Employment and Immigration Law Update - Holiday pay for term-time only workers


22 August 2019

The Court of Appeal has considered how holiday pay should be calculated for term time only (part-year) workers.

The Harper Trust v Brazel (UNISON intervening) [2019] EWCA Civ 1402

Facts

The claimant, a music teacher, is employed by the Trust on a permanent employment contract. She works variable hours during school term time, and is only paid for the amount of work carried out. The court described her as a “part-year worker”, distinguishing her from a part-time worker who would work throughout the whole year.

The claimant took all her holiday entitlement during the school holidays. The Trust calculated the claimant’s holiday pay in line with the approach recommended in the Acas guidance for casual workers. This states that the statutory entitlement of 5.6 weeks’ leave is equivalent to 12.07% of the hours worked over a whole holiday year. The Trust calculated this figure at the end of each term and paid the claimant one third of that figure. The claimant considered that by adopting this method of calculation she was being underpaid. She thought that her holiday pay should instead be calculated using the 12 week average calculation set out in the Working Time Regulations 1998 (WTR), for the period immediately preceding the holiday.

The claimant raised a grievance but it was ultimately unsuccessful. She brought a tribunal claim for unlawful deductions from wages. The employment tribunal dismissed her claim, holding that it was correct for the claimant’s holiday pay to be pro-rated to reflect the weeks that she actually works. The Employment Appeal Tribunal (EAT) allowed the claimant’s appeal, finding there to be no grounds for departing from the calculation prescribed by the WTR. The Trust appealed to the Court of Appeal.

Court of Appeal decision

The appeal was dismissed. The Trust’s case was that it would not be equitable for the claimant, who works only 32 weeks per year, to be entitled to holiday pay as if she had worked 46.4 weeks (52 weeks less 5.6 weeks of holiday). This would entitle her to a higher proportion of her total earnings than if she had worked full time (17.5% of her pay as opposed to 12.07%). The Trust argued that the principle of pro-rating pay should apply to part-year workers in respect of the amount of leave accrued, in a similar way as is well established for part time workers.

The court disagreed, holding that the WTR do not provide for the pro-rating of holiday pay for a part-year permanent worker. It considered that the existing calculation method under the WTR is straightforward and should be followed, even though this will result in part-year workers being entitled to a higher proportion of their annual earnings as holiday pay.

Consequences

This decision will have significant consequences for employers who engage staff on permanent, term-time (or part-year) only contracts, particularly in the education sector. It confirms that, subject to any further appeal, the formula suggested in the Acas guidance for calculating holiday pay for casual workers should not apply to part-year workers and instead, the averaging provisions under the WTR should be used. The calculation provisions will change from 12 weeks to 52 weeks from 6 April 2020, but this excludes any weeks in which no remuneration is payable. We would expect the Acas guidance to be updated to reflect this decision soon, provided the case is not appealed. In the meantime, employers should take steps to assess any potential liability for underpayments of holiday pay as a result of this decision.

This article is from the August 2019 issue of Employment and Immigration Law Update, our monthly newsletter for HR professionals. To download the latest issue, please visit the newsletter section of our website. Law covered as at August 2019.

The content of this article is for general information only. For further information please contact Liz Stevens or another member of Birketts' Employment Law Team.