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Following the recent case of Harpur Trust v Brazel, it appeared that many businesses would need to revisit their holiday calculations for part-year workers.
As a result, hospitality and leisure businesses with staff who work for part of the year and have periods when they do not work (students and other casual workers, for example) face claims if they do not recalculate holiday pay. In particular, the 12.07% method for calculating the holiday pay of casual workers on permanent contracts is no longer valid.
Myerson's Employment Team has previously discussed the background and decision of this important case at our Autumn Seminar, a video of which can be found here: Myerson Solicitors Presents: Employment Law Autumn Update.
Case of Harpur Trust v Brazel
In Harpur, the Supreme Court concluded that the Percentage Method used to calculate Ms Brazel’s holiday pay was directly contrary to the Working Time Regulations 1998. The Percentage Method calculates that holiday entitlement accrues 12.07% of hours worked. This calculation derives from the fact that the standard working year is 46.4 weeks (52 weeks less the statutory 5.6 weeks holiday entitlement), and 5.6 weeks is 12.07% of 46.4 weeks.
The Supreme Court held that the Percentage Method calculation resulted in an underpayment of holiday pay for Ms Brazel, whose holiday pay was prorated based only on the fact that she only worked between 32 and 35 weeks per year (during the school terms). Instead of the Percentage Method, the Supreme Court held that Ms Brazel’s holiday pay should not be prorated to term time weeks and should be calculated based on average pay over the previous 52 weeks in which she performed work.
To many, this decision appeared unfair as a part-year worker would be entitled to a larger holiday entitlement than part-time workers who work the same total number of hours across the year. The Supreme Court acknowledged that these general rules sometimes provide anomalies in untypical cases. However, it is estimated that the decision will benefit up to 500,000 part-year workers, particularly those who work term times in the education sector.
Changes to Holiday Entitlement in 2023
In early 2023, the government launched a consultation concerning calculating holiday entitlement for part-year workers. The proposed changes would allow employers to prorate holiday entitlement for part-year workers so that the holiday pay they receive is proportional to the weeks they work. This result is achieved by including weeks in which workers perform no work (i.e. the school holidays) in the 52-week reference period.
The proposed changes signal a possible return to the Percentage Method, as the simplest method to calculate statutory annual leave entitlement for part-year workers would be by multiplying the total hours worked in a 52-week reference period by 12.07%.
It is estimated that the decision benefits up to 500,000 part-year workers. Many of these work in the education sector but other sectors, including hospitality and leisure, also use part-year workers.
In the meantime, employers with part-year workers should continue calculating holiday entitlement using the Harper ruling until the outcome of the government’s consultation is announced. Keep an eye on Myerson’s employment law updates for any news on the consultation results.