In an important recent decision, the Employment Appeals Tribunal (EAT) has decided that holiday pay for term-time workers cannot be calculated on the basis of 12.07% of pay.
The Working Time Regulations (WTR) set out that employees are entitled to 5.6 weeks’ holiday per year, that’s 28 days for 5 day-a-week worker. If a workers’ hours are fixed, calculating holidays is straightforward. However, if hours are variable, the position is more complex. According to the WTR, employer should carry out a “12-week lookback” every time a holiday is taken in order to work out average hours and pay (ignoring weeks when no work is done).
Carrying out this procedure every time a holiday is taken can be time-consuming and complex. Instead, employers will often apply a straightforward 12.07% percentage to work out how much holiday and holiday pay a worker should get. This is a percentage expression of total statutory holiday entitlement (5.6 weeks) over the remaining number of working weeks in the year (46.4 weeks). While this approach isn’t technically sanctioned under the WTR, it is a useful shorthand for employers where using the 12-week lookback is difficult. However, there is a danger that this approach can leave employees short changed, as was the case in Brazel v The Harpur Trust.
The Claimant, a part time music teacher, worked mainly during term time (32-35 weeks a year) on a zero hours’ contract. Her holiday pay was calculated on the basis of 12.07% of her total pay over the year. However, this approach left her with less holiday pay than she would have been entitled to if the school had taken a 12 week average of pay from weeks actually worked, ignoring out of term weeks. As the teacher only worked for part of the year, using the correct calculation method she should have been due 17.5% of her annual earnings as holiday pay, not 12.07%.
The EAT confirmed that part-time workers are not to be treated less favourably than full-time workers and it found that, by using the 12.07% calculation, a limitation was imposed which disadvantaged part-time workers. This case is of particular importance to employers who have employees who work part of the year, for example schools, as it confirms that holiday pay for these types of worker should be calculated using a percentage of the average hours they have worked in the preceding 12 weeks immediately before the payment is made.
If you have any concerns about your term-time employees’ holidays are calculated, please contact your HR Consultant or Employment Solicitor who will be able to provide further guidance.