The Supreme Court case of Harpur Trust v Brazel (2022) has recently clarified the law in relation to pro-rated holiday entitlement, and the impacts for employers could be significant.
The case was about a Part-Year worker who had a continuing contract but did not work every week of the year. The decision affects Part-Year workers, Zero-Hour workers, Seasonal workers and potentially Annualised Hours and Casual workers; it does not affect part-time workers who are contracted to work every week.
The Supreme Court judgment is that anyone on a Part Year, Casual, Zero-Hours or Annualised Hours continuing contract who does not work every week in a year is entitled to 5.6 weeks’ holiday, not a pro-rated entitlement.
This means that employers will no longer be able to pay holiday to such workers at the 12.07% rate. Holiday pay will also need to be paid at the 52-week average.
How has this happened?
The Working Time Directive contained the ‘conformity principle’ meaning that anyone working less than full time, be that hours per week or weeks per year, would have a pro-rated entitlement. When the Directive was enacted in the UK as the Working Time Regulations, this was not included. Therefore, the Regulations state that all workers are entitled to 5.6 weeks’ leave per year. The Working Time Directive does not prevent a more generous provision being made by domestic law. The UK could have amended the domestic legislation but chose not to.
What are the implications?
Part Year, Zero Hours and Season workers continuing contracts should be amended to remove references to the 12.07% holiday entitlement or to the pro rating of holiday entitlement. Existing staff on these contracts should be issued with an Amendment to Contract, and this should be done within one month.
Employees on Part-Time and Annualised Hours contracts should also be reviewed to highlight anyone who does not work every week.
Employees on these contracts will be entitled to 5.6 weeks’ holiday per year from now on. Holiday pay will then be based on their average weekly pay over the previous 52 weeks, excluding any weeks which they did not work and taking into account the renumeration of earlier weeks to bring the total up the 52 weeks (if the worker has not worked for the employer for 52 weeks, then an average of the weeks worked should be used).
This should be implemented promptly to correctly pay workers holiday entitlement thus reducing the likelihood of claims for backdated holiday (there is a three-month time limit for such claims). Otherwise, employers could face costly Tribunal claims. Casual worker contracts which provide for no continuity of service between assignments will not be affected as these are not continuing contracts. Employees on Fixed Term contracts will similarly be unaffected.
MHA’s HR Solutions team can review Contracts of Employment and advise on the correct calculation of holiday entitlement and pay going forward.
This article originally appeared in the September edition of Not for Profit eNews.