Supreme Court Decision handed down
The judgment in Harpur Trust v Brazel has been delivered by the Supreme Court with the Supreme Court dismissing Harpur Trust’s appeal. This will have significant implications for employers with staff working part of the year on permanent contracts who have their holiday entitlement pro-rated to reflect the number of weeks the individual actually works each year. The education sector particularly will be impacted as term-time contracts are the norm.
Potential future claimants will include other part-year permanent workers whose holiday pay has been incorrectly calculated (likely using the 12.07% method discussed below). Such claims will be brought as unlawful deductions from wages and will be limited to a two-year backstop.
It is likely that employers will now look at ways to engage staff on casual (i.e. non-permanent) zero hours contracts for specific periods (i.e. seasonal workers) with no umbrella /permanent contract in place covering the periods that the individual does not work. This would still permit the 12.07% calculation as set out below.
Background to Harpur Trust v Brazel:
The Harpur Trust employed Ms Brazel on a “zero hours” permanent contract to teach music. Her contract provided her with 5.6 weeks’ paid holiday, which had to be taken outside normal school holidays. Ms Brazel worked a variable number of hours under her “zero hours” permanent contract each week and was only paid for the hours that she taught during term time. Prior to September 2011, Ms Brazel’s holiday pay for the 5.6 weeks was determined by calculating her average week’s pay in accordance with s224 Employment Rights Act 1996 (ERA) and multiplying that by 5.6. At the relevant time, s224 ERA defined a “week’s pay” as the amount of a worker’s average weekly pay in the period of 12 weeks ending with the start of their leave period, ignoring any weeks in which they did not receive any pay. Please note that this reference period was extended from 12 to 52 weeks in respect of holiday pay due on or after 6 April 2020. From September 2011, however, Harpur Trust changed its calculation method. In line with Acas guidance at the time (now re–drafted). They calculated Ms Brazel’s hours worked at the end of each term, took 12.07% of that figure and then paid Ms Brazel her hourly rate for that number of hours as holiday pay (the 12.07% Calculation). 12.07% is the proportion that 5.6 weeks of annual leave equates to for a total working year of 46.4 weeks.
Harpur Trust calculated Ms Brazel was entitled to 12.07% of her pay for the term, reflecting only the hours she actually worked. The net effect of this change was that Ms Brazel received less holiday pay.
Ms Brazel brought a claim in the Employment Tribunal (ET) for unlawful deductions from her wages for underpayment of holiday pay.
The ET dismissed her claim, but the Employment Appeal Tribunal (EAT) allowed her appeal holding that the 12.07% Calculation could not be used in such circumstances.
The Court of Appeal then dismissed Harpur Trust’s subsequent appeal and now the Supreme Court has also dismissed Harpur Trust’s appeal.
The Supreme Court has confirmed the rights of permanent part-year workers to the full 5.6 weeks’ statutory holiday to be paid by averaging their pay over the previous 52 weeks. Weeks where no work takes place are ignored in the calculations.
Accordingly, the 12.07% Calculation for pro-rating holiday pay should no longer be used as a method of calculating holiday pay for permanent part-year workers.
- Please note – this guidance is not intended to be taken as legal advice – for individual situations you will need to take specific legal advice.
- The information in this guide is correct as of 20 July 2022.
- All information provided should be read alongside the relevant Government Guidance at https://www.gov.uk.