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Under the Working Time Regulations (WTR), workers in the UK have a right to a minimum of 5.6 weeks’ annual leave and are entitled to be paid at the rate of a week’s pay in respect of this leave.

Although holiday pay for workers with variable hours should be based on average weekly pay, many employers adopt the approach of calculating holiday pay on a pro-rata and capped basis, using 12.07% of annualised hours for workers on zero-hours contracts..

In the Harpur Trust case, Mrs Brazel worked for the Trust as a visiting music teacher. Her contract was a permanent zero hours contract and she only worked during school term time. The school year varies between 32 and 35 weeks. Mrs Brazel was only paid by the trust for the work that she performed and was entitled to 5.6 weeks’ annual paid leave, which she had to take during the school holidays.

Prior to 2011, the Trust calculated Mrs Brazel’s holiday pay with reference to her average weeks’ pay over the relevant reference period.

In 2011, the Trust amended the way in which it calculated Mrs Brazel’s holiday pay, in line with ACAS guidance that was issued at the time. The Trust subsequently made three annual payments to Mrs Brazel, calculating her holiday entitlement at 12.07% of her earnings in the preceding school term.

Mrs Brazel brought a claim in the employment tribunal arguing that the Trust’s method of calculating her holiday entitlement meant that she had been underpaid. She argued that her holiday entitlement should be based on her average earnings over a relevant reference period (at the time that reference period was 12 weeks before the annual leave was taken but as from April 2020 the reference period is 52 weeks before the leave is taken).

At first instance, the Employment Tribunal dismissed her claim. The Tribunal found in favour of the Harpur Trust, who had argued that pro-rating was important to ensure full time workers were not treated less favourably. Mrs Brazel appealed, and the Employment Appeal Tribunal upheld that appeal, finding in Mrs Brazel’s favour. The Court of Appeal later dismissed an attempt by the Trust to overturn this decision. The Trust, consequently, appealed once more to the Supreme Court.

In its judgement, published on 20 July 2022, the Supreme Court rejected the Trust’s appeal and held that the correct method of calculation for part-year workers is to assess a week’s pay based on the average weekly pay for the 52 weeks before the first day of the relevant holiday, ignoring weeks not worked, and multiply this by 5.6. The Supreme Court acknowledged that the method of calculating holiday pay using a reference period did slightly favour workers with atypical work patterns. However, the Court felt that this result was compliant with the WTR and EU law.

This judgement will undoubtedly have a significant impact on employers of permanent part-year workers across both the education and commercial sector. Many employers will need to review the way in which they calculate holiday pay for part-year workers to ensure that staff are receiving the correct amount of holiday pay. Employers may wish to estimate potential liability for unpaid holiday pay where some staff are working atypical hours and only work for part of the year.

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