382: Supreme Court confirms that holiday pay must not be pro-rated for part-year workers

The Supreme Court has published its landmark judgment in Harpur Trust v Brazel, a case which has significant financial and practical implications for employers with “part-year” workers who, despite only working for part of the year, are on permanent contracts, which last throughout the year. This may also apply to casual and zero-hours workers.

Confirming the Court of Appeal’s decision, the Supreme Court has ruled that the Working Time Regulations 1998 (WTR) are clear that all workers on a permanent contract are entitled to the full 5.6 weeks’ leave regardless of how much work is done in that time. This means that statutory holiday pay must no longer be pro-rated for part-year workers.

Mrs Brazel was employed by the Harpur Trust as a peripatetic music teacher on a permanent contract with term-time only hours that varied depending on how many pupils were learning to play musical instruments that term. As the school holidays are longer than her leave entitlement, by agreement she was paid her holiday pay in three instalments at the end of each term based on 12.07% of her earnings during that term. This was the method recommended by Acas at that time to ensure parity with full-time equivalent workers.

Mrs Brazel claimed that this calculation method meant that she was receiving less holiday pay than she was entitled to under the WTR, which state that the calculation method is as set out in section 224 of the Employment Rights Act 1996 (ERA). Under this provision, her holiday pay should have been calculated by working out her average earnings for the 12 weeks immediately before the holiday (although it should be noted that this 12-week period prescribed by the ERA has now been amended to a total of 52 weeks, as of 6 April 2020) . This was completely different to the 12.07% approach adopted by the Trust. The Trust argued that her method of calculation would result in her receiving proportionally more holiday than full-time employees.

The Employment Tribunal dismissed Mrs Brazel’s claim, ruling that a pro rata principle should apply and that words should be read into the WTR to that effect. However, her appeals were then upheld by the Employment Appeal Tribunal, the Court of Appeal, and now the Supreme Court. We now have confirmation that the 12.07% accrual method is inconsistent with the WTR. Part-year workers must receive an annual leave entitlement of 5.6 weeks even though this means that they are then in a disproportionately more favourable position than their full-time colleagues. As an extreme example, an exam invigilator working three 40-hour weeks each year would receive 5.6 weeks of holiday, with a holiday pay entitlement of nearly twice their annual earnings.

The Supreme Court’s judgment means that holiday can no longer be pro-rated for part-year workers who are on permanent contracts, and the 12.07% method of calculating holiday pay is unlawful. These workers now have an automatic right to 5.6 weeks’ holiday regardless of the amount of time they work. Whilst this judgment was widely expected, it leaves complex and costly practical difficulties for many employers.

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