Holiday pay (and how to calculate it) has for a long time been one of the most challenging issues facing employers. The latest question to come before the courts is how holiday pay should be calculated in circumstances where someone only works for part of the year. While many have assumed that this only relates to the education sector, any employer engaging zero hour workers on a seasonal or sporadic basis should be concerned.
The Supreme Court has today handed down its judgment in Harpur Trust v Brazel, a case which centred around whether a worker’s right to paid annual leave should be pro-rated if they work on an occasional basis during the course of a year.
Ms Brazel was a music teacher, working as a zero hours employee for the Harpur Trust. Even though she was employed throughout the year, unlike many other teachers she was not paid a yearly salary. Instead, she was paid for the times when she worked, and was not paid during the school holidays unless she was using her annual leave allowance.
Ms Brazel complained that the basis on which her holiday pay was being calculated was wrong. The school was using the calculation that the Advisory, Conciliation and Arbitration Service (Acas) recommended at the time. Namely, for every day Ms Brazel worked, she accrued 12.07% of that time as holiday. Acas had divided 46.4 (the number of weeks in a year, less the minimum amount of holiday available under the Working Time Regulations 1998) by 5.6 in order to arrive at this accrual rate. In other words, they had worked out how much holiday would accrue from one day to the next in order for a worker to accrue their full entitlement over the course of a full year.
Ms Brazel argued that as she was employed throughout the year, even if she was not working for all of it, the words of the Working Time Regulations were clear: she should be entitled to 5.6 weeks of holiday, and consequently 5.6 weeks' pay. She further argued that her pay for this time should be calculated by reference only to the days on which she worked and was paid (i.e., disregarding any days where she was unpaid). By allowing her to accrue holiday only on the days she actually worked (which was the effect of the Acas method of calculation), she was being short changed.
The school argued that her holiday should be calculated on a proportional basis, arguing that part year workers would otherwise fare better than their full-time counterparts. It argued that if Ms Brazel's position was correct, someone who only worked for (say) one week per year and was paid £1,000 for that week would be entitled to holiday pay of £5,600.
The Supreme Court has agreed with Ms Brazel. It rejected the school's alternatives and held that there was no need to overturn the statutory provisions in order to deal with atypical workers in a different way.
Many employers in the education sector will be aware of the arguments at play, as the Supreme Court has agreed with the Court of Appeal's decision from 2019. However, the ramifications of this have yet to be felt by many employers in other sectors. While Ms Brazel had the unusual status of a zero hours employee (rather than a zero hours worker), employers who rely on zero hours workers from time to time throughout the course of the year could face arguments that those workers are in fact 'employed' for the purposes of the Working Time Regulations, and are therefore entitled to an increase in their holiday entitlement and pay. Employers engaging zero hours workers on a sporadic basis should therefore be clear as to when someone ceases 'employment' in order to avoid unexpected liability.
In the meantime, many have speculated that the Working Time Regulations are ripe for review by a post-Brexit Parliament. Given that the Supreme Court has now clarified the way in which the legislation operates, this case may well result in more voices calling for change.