‘Part-year’ workers win legal holiday bonus - Sue Gilchrist

UK employers have been urged to review the way they calculate holiday pay for “part-year” workers following a landmark ruling by the UK Supreme Court.

Sue Gilchrist, Legal Director and employment law specialist at Pinsent Masons

The court ruled that workers who are only employed during some weeks of the year, but who have a contract which lasts for the full year, are entitled to a full year’s statutory holiday entitlement, which is 5.6 weeks per year.

It dismissed arguments that employers should be able to reduce part-year workers’ holiday entitlement on a pro-rata basis to account for weeks they have not worked, and also set out the correct method for calculating pay for these workers.

The judgment is particularly relevant to universities and other education providers who employ “term-time” workers, as well as for employers of atypical workers such as those under umbrella contracts.

It is likely to lead to “windfall” payments for some workers whose holiday entitlement and pay will now have to be calculated in accordance with the judgment, and it may well spur the UK government to change legislation.

The Supreme Court’s ruling was issued in a case involving a dispute over holiday leave and pay entitlements between a school and Lesley Brazel, a visiting music teacher. The dispute revolved around the application of the UK’s Working Time Regulations (WTR) - legislation that has its origins in EU law.

Under the WTR, workers are entitled to 5.6 weeks of paid annual leave. In practice, Brazel has additional time off over the year due to her term-time only contract. The Trust running the school changed the way it calculated Brazel’s holiday pay, effectively pro-rating holiday pay to the number of hours worked.

This calculation method followed Acas guidance at the time, (Acas has since changed its guidance) but Brazel lodged a legal challenge against the Trust claiming unlawful deduction from wages.

The court said that the Trust’s methods of calculation run contrary to UK law, including calculation methods set out in the Employment Rights Act and incorporated into WTR. The court confirmed that the correct way to calculate holiday pay for workers of this type is to provide 5.6 times a week’s pay.

A “week’s pay” for workers of this type is the amount of a worker’s average weekly pay in the period of 12 weeks ending with the start of their leave period, ignoring any weeks in which they did not receive any pay.

The Supreme Court rejected the Trust’s claim that the calculation method should be rejected because it leads to an “absurd result” - because it would mean a worker in Brazel’s position would receive holiday pay representing a higher proportion of their annual pay than full-time or part-time workers who work regular hours.

The UK’s Working Time Regulations may go further than required by the European Working Time Directive, but that is not for the court to “fix”. It will be for the UK government to revise the regulations if it chooses. For now, employers will want to review both how they calculate holiday pay, and how they engage workers to cover temporary or short-term work requirements.

Sue G ilchrist, Legal Director and employment law specialist at Pinsent Masons