In a recent Judgement in the case of Harpur Trust -v- Brazel the Supreme Court has clarified the correct method for calculating holiday pay entitlement for an employee with no fixed working pattern.
This judgment has ramifications for employers with employees and workers on zero hours contracts with no fixed working pattern across a wide range of sectors. Employers in the education, hospitality, retail, health and social care sectors are more likely to be impacted. In this case the claimant, a visiting music teacher on a permanent contract, worked during term time. She worked on average 32 weeks per year (which fluctuated based upon the number of children enrolled). The issue arose in relation to holiday entitlement. The Harpur Trust used ACAS Guidance and paid her one third of 12.07% of her overall earnings. The claimant argued that it was not lawful with the Working Time Regulations. Instead, she argued that she should receive the average weekly remuneration for the previous twelve weeks.
Both the Employment Appeals Tribunal (EAT) and the Court of Appeal ruled that the Working Time Regulations 1998 did not allow for pro-rating of holiday pay for permanent employees. Under Section 224 of the Employment Rights Act 1996 (s. 20 of the Employment Rights (NI) Order 1996) the claimant was deemed to have no normal working hours and the 12 week average should be used. The Harpur Trust appealed this decision to the Supreme Court.
The main thrust of the argument by the Harpur Trust was that the use of the 12 week average gave the claimant a more favourable position than what full-time members of staff would receive. In some instances, it would lead to approximately 17% of her earnings being holiday pay. The judgment outlined that when it came to workers with no normal hours, the previous twelve weeks should be used as the basis to determine the rate of holiday pay. On the argument that it led to absurd results, it was held that whilst the result may not have been intended by Parliament it was not such that some ‘slight favouring of workers with a highly atypical work pattern’ should not be deemed to be so absurd that it requires a revision of the statutory scheme. There are situations in which general rules will provide some anomalies. The Supreme Court did acknowledge that such a right was not required under the Working Time Directive but that there was nothing to prohibit more generous provisions for workers within domestic law (which is the case under the Working Time Regulations).
Accordingly, the use of Section 224 of the 1996 Act which sets out the calculation of an average week’s pay was a policy choice made by Parliament which meant the number of hours worked affects the amount of a week’s pay in some circumstances but not in others. The last substantive paragraph of the judgment made this clear in stating:
‘In short, the amount of leave to which a part-year worker under a permanent contract is entitled is not required by EU law to be, and under domestic law is not, prorated to that of a full-time worker.’
As a result, the appeal was dismissed.
Practical Lessons
If your organisation engages atypical workers – such as part-year workers who remain employed even when they are not working – you should review your arrangements for calculating holiday pay. This may entail changing your method of calculation and considering the options for dealing with any back-payments due to staff.
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