Holiday Pay in light of Harpur Trust v Brazel
Harpur Trust v Brazel enabled the Supreme Court to decide, for the first time, how holiday pay should be calculated for an employee or worker who works variable hours for only part of the year, but whose contract covers them for the whole year. Such engagement is especially common in the education, retail and hospitality setting.
What did the case concern?
The dispute concerned whether Ms Brazel, who was engaged to work during part of the year only on a continuing contract, was entitled to at least 5.6 weeks statutory holiday and associated pay, as Ms Brazel contended, or whether Harpur Trust were able to pro-rate her allowance to reflect the number of weeks she actually worked, as the Trust contended. In this instance, Harpur Trust had used the ‘12.07% method’, such method had previously been endorsed by Acas in its guidance. Full details of the case can be accessed via the Supreme Court website, here.
The decision
The Supreme Court upheld the Court of Appeal’s ruling, dismissing the Trust’s appeal. Thus confirming that part-year workers are also entitled to 5.6 weeks’ paid holiday each year. Therefore, the ‘12.07% method’ should no longer be used in such circumstances. Further, it also confirms that staff, such as Ms Brazel, whose pay fluctuates, must have their holiday pay calculated in compliance with the ‘week’s pay’ formula as established in the Employment Rights Act 1996.
Consequently, a ‘week’s pay’ should be determined via an averaging period of the previous 52 weeks of work. Where no work takes place in a week, that week is ignored for the purposes of the calculation and the average can go back as far as 104 weeks from the week in question. If the individual has not worked for the full 52 week period, the reference period should go back to the start of their employment.
Implications
Individuals who have been underpaid previously may be able to bring retrospective claims against their employer. However, workers are usually subject to a three month time limit from the date of their last underpayment. Therefore, individuals whose engagement terminated three months or longer ago may struggle to bring a retrospective claim. There is also currently a two-year limitation period on claims.
It must be remembered that the case only applies to statutory holiday. Therefore, any contractual holiday entitlement in addition to the statutory minimum would be governed by the contractual terms.
Although the case concerned a part-year worker with variable hours, it will also affect all workers without ‘normal’ working hours i.e. those that are fixed and regular. However, the biggest impact will be on hourly paid workers with permanent contracts who have unpaid non-working weeks, due to such weeks being disregarded in the method of calculation.
Contact us
Rollits can provide detailed employment advice, specific to your organisation. In particular, we can review your contracts of employment to ensure adherence with this decision as well as helping to assess potential liability for previous holiday pay underpayments. We can also review working arrangements with a view to suggesting a number of practical steps that may reduce liability in respect of holiday pay moving forward.
