Part Time Workers and Holiday Pay
A decision of the Supreme Court issued on 20 July 2022 has attracted a lot of publicity.
Contrary to the impression given by some of the coverage, the key issue in the case was the amount of holiday pay which should be paid to a worker who only works on certain weeks of the year.
The worker in question, Ms Brazel, was a music teacher who worked for an educational trust, providing music tuition during term times. The amount of work that she did varied from week to week. She did no work for the trust during school holidays and was required to take her paid holiday entitlement during school holidays.
The trust calculated her holiday pay by the method which is widely used by employers in cases where the amount of work done and the pay received by a worker varies from week to week and there is uncertainty about whether work will be done in every week. This method involves calculating holiday pay as being 12.07% of average weekly pay. This percentage is arrived at by taking the statutory holiday entitlement of 5.6 weeks per year and dividing it by the remaining number of weeks in the year after deducting the weeks of holiday, i.e. 46.4 weeks. This formula produces a broadly accurate figure for holiday pay in cases where a person works during each of the 46.4 weeks and their holiday entitlement is the statutory 5.6 weeks, even if their working hours vary from week to week.
The formula does not work in cases such as Ms Brazel who did no paid work at all in some weeks. This is illustrated by a simple example. If a person works 36 weeks per year with average weekly pay of £500, the person earns £18,000 over the whole year. The person takes their paid holiday during the remaining 16 weeks of the year. Their entitlement to holiday pay is £500 x 5.6 over the year as a whole – i.e. £2,800. In a case like this the person’s holiday pay represents about 15.55% of the person’s annual earnings (£2,800/£18,000), not 12.07%.
On this basis Ms Brazel claimed that she was underpaid for her holidays. She said that, on the basis of the number of weeks which she worked in each year (about 32 in her case), her holiday pay should have represented about 17.5% of her annual earnings, not 12.07%. The Supreme Court agreed with her, as the Employment Appeal Tribunal and the Court of Appeal had previously done.
The trust for which she worked argued that the amount of holiday and holiday pay given to someone who does no work at all for several weeks in the year should be proportionate to the amount of time actually worked during the year as a whole. The Supreme Court rejected this. The Court ruled that if a person is engaged under a contract which lasts for a whole year, the person is entitled to be paid for the statutory 5.6 weeks’ holiday during that year (using the average rate of pay earned during working weeks) even if the person only works for a proportion of the year as a whole.
The case creates various potential complications for employers. Some may decide to engage workers on a series of contracts, with each one covering only the period when work is expected to be done. In that case the worker’s paid holiday entitlement would be proportionate to the length of the period covered by each contract, so that for example a contract lasting 13 weeks would attract a paid holiday entitlement of 1.4 weeks (7 days for someone who works 5 days per week). Administratively, this would be a headache for many employers. In some cases outside the education sector there may be uncertainty at the start of a year about the number of weeks in the year when work will actually be done. In such cases the only option may be to review and, if necessary, recalculate the amount of holiday pay paid to the person at the end of each Holiday Year. This case has potentially important implications for those employed on zero hours contracts. Their precise holiday pay entitlement would appear to be difficult to determine until the end of each Holiday Year. Some careful thought is going to be required if further claims like that pursued by Ms Brazel are to be avoided.
If you have any questions arising from this article, please contact Keith Potter or the member of the Employment Team.