Partner Sue Dowling, in our Employment Law team, explains the implications of Harpur Trust v Brazel for employers when it comes to calculating holiday pay for part-time/part-year workers.
Introduction
The very recent Supreme Court case of Harpur Trust v Mrs Brazel looked at the considerable complexities in calculating holiday pay entitlements for employees that are:
i) Under a permanent contract;
ii) Work variable part-time hours; and
iii) Only work part of the year.
Background
Ms Brazel was a music teacher employed on a zero-hours permanent contract which provided that she receives ‘5.6 weeks’ paid annual leave. She only worked during the term-time so a maximum of 32 weeks out of 52 weeks in a calendar year, and during that time, she worked irregular days depending on the demand at the school for music lessons. She was paid per hour for the lessons she delivered. She was required to take her paid leave during the school holidays.
She argued that her ‘week’s pay’ for the calculation of her 5.6 weeks’ paid holiday entitlement should be calculated with reference to section 224 Employment Rights Act 1996[1] i.e. taking those weeks that she could work and looking at the average she earned over the course of the previous 12[2] weeks, ignoring any weeks when she did not work/was not paid. Applying this method (referred to by the Supreme Court as the ‘Calendar Week Method’) meant that she would receive holiday pay of £687.26.
Her employer took the view that the above could not be right (and indeed was ‘absurd’) as she, as a part-time worker would be paid proportionately more than a full-time employee. They took the approach that as she did not work the same number of weeks per year as full-time staff (52 weeks less holiday entitlement), her holiday leave entitlement (of 5.6 weeks) should be pro-rated with reference to the weeks she actually worked (i.e. 32 weeks). Apply this method, known as the ‘Percentage Method’ (so 12.07% of total hours worked x her pay rate), she should only receive paid holiday entitlement of £452.24.
The Court ultimately agreed with Ms Brazel and her position that the Calendar Week Method applies.
Why did the Supreme Court conclude that the Calendar Week Method was correct?
Despite Harpur Trust arguing that this more favourable treatment of part-time/part-year workers could not be right, the Supreme Court was clear in its Judgment (agreeing with the conclusion of the Court of Appeal). The Court found that Parliament had made a policy choice to incorporate into the Working Time Regulations (WTR) (which provide for the entitlement of a worker to 5.6 weeks’ of paid leave per annum) the method of calculating an average week’s pay, by incorporating the provisions of section 224 ERA 1996. This applied to those who worked very irregular hours as well as to those who worked regular hours. The Court found that there was nothing in the WTR to permit the calculations to be made other than by applying section 224 ERA and further that there was nothing that prevented a part-time/part-year worker (as a result of this application) receiving proportionately more than a full-time worker.
Conclusions
The application of the Calendar Week Method (under section 224 ERA) will have some dramatic consequences resulting in a part-time/part-year worker being treated much more favourably than a full-time/part-time worker, working for the full year. Using the simplest of examples, an exam invigilator under a permanent contract for three weeks each year working 40 hours per week and being paid £18.00 per hour would earn pay of £2,160.00. Using the Percentage Method, they would be entitled to holiday pay of £260.64 and using the Calendar Week Method, they would be entitled to holiday pay of £4,032.00 – almost twice the amount of the actual earnings.
However, the Supreme Court considered that it “did not regard any slight favouring of workers with a highly atypical work pattern as being so absurd as to justify the wholesale revision of the statutory scheme” i.e. to move away from the clear application of section 224 ERA.
There is however no need for employers to panic; the decision of the Supreme Court in this case will have little impact on most part-time working arrangements; it is important to remember that the decision only relates to employees/workers on a permanent contract; working variable part-time hours and working only part of the year.
Accordingly, whilst the Supreme Court decision in Harpur Trust v Brazel is undoubtedly an important decision and has important implications for certain working arrangements, it would be entirely wrong (and could lead to very costly mistakes) for employers to conclude that the case is authority for the principle that pro-rating full-time holiday entitlement for part-time employees is no longer appropriate; in many instances (e.g. where the worker is working regular part-time hours across the annual leave year or has a fixed salary) the pro-rating of full-time entitlements to apply to a part-time worker will be the correct method to apply.
As in virtually all aspects of employment law/HR practice, each relationship between employer and employee/worker, needs to be considered on its own facts to establish what rights/obligations apply.
Our specialist Employment Law team can advise employers on to the above, as well as in relation to a broad range of matters.
A more in-depth analysis of the Harpur Trust v Brazel decision and the rationale behind it, is available via our briefing note (PDF) on the case.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
[1] Section 224 ERA defines a week’s pay as the amount of the employee’s average weekly remuneration in the period of twelve weeks ending— (a) where the calculation date is the last day of a week, with that week, and (b) otherwise, with the last complete week before the calculation date. In arriving at the average weekly remuneration no account shall be taken of a week in which no remuneration was payable by the employer to the employee and remuneration in earlier weeks shall be brought in so as to bring up to twelve the number of weeks of which account is taken.
[2] The 12 week reference period was changed to 52 weeks in 2020.
