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UK: Holiday pay for part year workers

The Court of Appeal has ruled that holiday pay for a teacher who worked irregular hours on a permanent term-time, or so-called “part-year” contract, should be calculated using her average earnings over a 12-week period and not pro-rated according to the proportion of the year worked. The common practice of applying a cap of 12.07 percent of annualised hours, as suggested by ACAS, was incorrect.

Ms Brazel, a visiting music teacher to a school, worked 10 to 15 hours a week during term time, on a permanent zero-hours contract.  She was paid monthly according to the hours worked. She did not work during school holidays and was paid for her annual leave in April, August and December, calculated as 12.07 per cent of her earnings in the previous term (a method recommended by ACAS on the basis that the statutory annual leave entitlement of 5.6 weeks represents 12.07 per cent of a working year of 46.4 weeks ie 52 weeks minus 5.6 weeks).

Ms Brazel claimed this method of calculating holiday pay was incorrect. She claimed her holiday pay should be calculated by taking the average weekly remuneration for the 12 weeks prior to the date she takes the holiday and multiplying it by 5.6, as prescribed by the Working Time Regulations (WTR).  Her claim was rejected by the employment tribunal which said that a part-year worker should have their holiday entitlement pro-rated to reflect the weeks they actually work; otherwise this would be unfair to full time workers.

The Court of Appeal ruled in favour of Ms Brazel because the WTR makes no provision for pro-rating.  Instead, they require the exercise of identifying a week’s pay in accordance with the rules set out in the Employment Rights Act, and multiplying that figure by 5.6 weeks. It was therefore wrong for term-time only workers to have their holiday pay capped at 12.07 per cent of annualised hours.

Practical Point

The judgement technically only applies to part year workers employed on permanent contracts. However, if you employ any zero hours workers, and cap holiday pay at 12.07% of earnings, you should consider the implications of this judgement carefully.  Conduct an audit of your workers’ holiday pay arrangements, decide if there is any potential liability for arrears and consider whether to act now or await the outcome of any appeal.

Brazel v The Harpur Trust