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What should employers do to avoid holiday pay hurdles?

Posted on 29th July 2022 in Employment

Posted by

Mai Mbye

Solicitor
What should employers do to avoid holiday pay hurdles?

At a time when many are going on holiday, a recent decision has highlighted how easy it can be to get holiday pay wrong. Last week, judgment was handed down by the Supreme Court in the case of Harpur Trust v Brazel. The case centred around earlier decision regarding part-year workers and methods of calculating holiday pay.

 

Harpur Trust v Brazel

Ms Brazel was employed on a permanent contract (term-time only) as a music teacher. As part of her employment, she was required to work irregular hours during term time. To calculate Ms Brazel’s holiday pay entitlement as a part-year worker, her employers followed the then ACAS guidance by multiplying the number of hours worked by her rate of pay and then multiplying this by 12.07% [the figure of 12.07% is based on the principle that the statutory minimum 5.6 weeks' holiday is equivalent to 12.07% of hours worked per year. The figure is reached by dividing 5.6 by 46.4 (being 52 weeks minus 5.6 weeks)].

Ms Brazel brought an Employment Tribunal claim arguing that this method of calculation was incorrect and that her employer should follow the same principle used for full-time workers by calculating holiday pay using the week’s pay calculation set out in the legislation (the ‘calendar week’ method). This method essentially calculates the average weekly pay over the previous 52 weeks (previously 12 weeks).

As a result, Ms Brazel subsequently brought an Employment Tribunal claim for unlawful deductions of wages. Whilst initially unsuccessful, she won on appeal and the Supreme Court has now confirmed that she was right all along. The Supreme Court has confirmed that the calendar week method represents the correct implementation of the Working Time Regulations and the amount of leave to which a part-year worker is entitled to should not simply be prorated.

 

What does this mean going forward?

This decision confirms that the holiday entitlement of 5.6 weeks should apply to not only full-time workers but also to those who work part-year.

Holiday pay for these workers should be calculated by reference to the hours worked over the previous 52-week reference period (calendar week method). However, in situations where the worker did not receive any remuneration on a particular week, the week should be ignored and not counted. Earlier weeks should be brought into account to ensure a full 52-week period of paid work has been identified. In these types of situations, employers can go back to a maximum of 104 weeks. If the employee has been employed for less than 52 weeks, the completed number of weeks should be used instead.

 

Potential risks

Employers who apply the previous method of calculating holiday pay (using the 12.07%) could face potential claims of unlawful deductions of wages. It is therefore important to ensure full compliance by using the calendar week method and adopting the 52 weeks referencing period.  

 

What should employers do?

Employers should review their current employment contracts and methods of calculation to establish whether there are any employees (working part of the year/irregular hours) who may be affected. If so, there may be an entitlement to pay arrears.

 

How can we help?

For further help and advice on holiday pay hurdles, please contact our specialist employment lawyers.

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