This month, the Supreme Court ruled that workers who are engaged on permanent contracts but who are only required to work part of the year (“part year workers”) cannot have their annual leave entitlement pro-rated on account of the weeks they are not required to work throughout the year.
This could apply, for example, to term time only workers in schools, seasonal workers such as exam invigilators or to any hourly paid casual staff who have a number of non-working weeks during the year (e.g. zero hours workers).
The case concerned was Harpur Trust v Brazel. This article will look at the facts of this case and the impact this ruling will have for employers of part year workers moving forward.
What are the facts of the case?
The claimant was a visiting music teacher and was engaged at a school run by the Trust on a permanent contract on a zero hours basis. She was paid on an hourly basis and worked variable hours during term time. It was agreed in the claimant’s contract with the Trust that she would be entitled to 5.6 weeks annual leave which she was required to take over the school holidays.
The Trust argued that it should be able to pro-rate the claimant’s holiday entitlement to reflect the fact she worked fewer weeks per year than full time staff. They therefore calculated her holiday pay by applying a fixed formula of 12.07% based on the pay received for the hours she had worked in the previous term.
This figure comes from the standard working year being 46.4 weeks (52 weeks less the statutory 5.6 weeks holiday entitlement) and 5.6 weeks is 12.07% of 46.4 weeks.
However, the claimant argued this was not compliant with the Working Time Regulations 1998 (WTR) and it resulted in her receiving a significant underpayment compared to the ‘week’s pay’ calculation set out in the Employment Rights Act 1996 (ERA 1996) for workers without normal working hours.
What was the outcome/
In the first instance, the Employment Tribunal found in favour of the Trust. They ruled that term-time workers should have their annual leave capped at 12.07% of earnings in order that full-time workers are not treated less favourably and to avoid a potential windfall for term-time only workers.
The claimant appealed the decision and this appeal was upheld by the Employment Appeal Tribunal and Court of Appeal. This was appealed again by the Trust to the Supreme Court.
The Supreme Court held that the Trust’s method of pro-rating holiday pay in accordance with weeks not worked was unlawful and not in accordance with the WTR. Workers who are on permanent contracts are entitled to a minimum of 5.6 weeks holiday a year, regardless of whether they are only required to work for part of the year.
How does this impact employers?
• Although the Supreme Court acknowledged that its decision would see affected term-time staff receive a potentially higher rate of pay than staff who work all year round, they justified their decision by issuing a reminder that Parliament has already set out a clear method for calculating an average week’s pay in the ERA.
• Potentially this ruling will affect all workers without normal working hours. Workers definitely covered are those who are hourly paid on a permanent contract but only work for part of the year. If this impacts on your organisation, you could consider using shorter fixed-term contracts to mitigate the burden of this additional cost.
• The Supreme Court ruling would not apply to permanent term-time workers whose salary is annualised and paid in 12 equal monthly instalments, such as most permanent teachers.
• Workers who are engaged on a short term contract are not affected (for example, a seasonal worker employed during a busy period). There are separate rules that apply automatically here when calculating holiday at the end of the assignment, although beware potential issues regarding overarching or umbrella contracts if re-engaging such an individual;
• Employers should promptly review their holiday arrangements with part year and casual workers to assess compliance and any potential liability in respect of underpayment of holiday pay in the past.
If you have any questions about this topic, please get in touch firstname.lastname@example.org