This is not a very exciting subject, but if you have such employees, the Supreme Court’s decision in Harpur Trust -v- Brazel may not be good news for you.
Up until this decision many employers had worked out holiday pay for these employees based on the percentage of the actual number of hours they worked. In the Harpur case the employer was paying the teacher concerned 12.07% of her term time earnings as holiday pay. This is based on the statutory entitlement of 5.6 weeks leave being equivalent to 12.07% of the hours worked over a full year, based on working the whole year. The Trust took the number of hours worked in each term, then took 12.07% of that total and paid Ms Brazel holiday pay accordingly. (I did say this is not exciting!) This was following ACAS Guidance at the time.
Previously they had calculated her holiday pay based on the average of the previous 12 weeks’ earnings multiplied by 5.6 weeks. The new calculation meant that she received less in holiday pay and so she took the matter to the Employment Tribunal as an unlawful deductions claim.
The Working Time Regulations and S.224 of the Employment Rights Act 1996 set out how holiday pay is to be calculated. S.224 provides for weekly pay to be calculated as an average of the most recent 12 weeks of earnings, not the most recent 12 weeks of employment which many employers have used. The Supreme Court decision has confirmed that the proper calculation is based on weeks of earnings and any weeks where earnings were zero are to be discounted. Since 2020 the 12 week period has been replaced by 52 weeks.
The Supreme Court recognised this could result in some part-year employees receiving a proportionately higher amount of holiday pay than those working regular full or part-time hours, but they were bound by the WTR and S.224. A change in current legislation would be necessary to address this further.
This decision will not change how you calculate holiday pay for full time or part time employees who work regular hours, but if you employ staff who work irregular hours for parts of the year only, you can no longer use the 12.07% method of calculating holiday pay, and you could end up paying more in holiday pay. You should review your contracts of employment and payroll processes accordingly.
If you have any further questions about any of the issues raised in this article, please contact Marina Vincent at firstname.lastname@example.org