Holiday pay calculation for part year workers has changed following the landmark Harpur Trust vs Brazel Supreme Court ruling.
Ms Brazel was a music teacher at the Harpur Trust. She has a term-time-only, zero hours contract. The Trust capped her holiday pay at 12.07% of her annual earnings. As Ms Brazel only worked part of the year, she argued the calculation should be based on her average earnings over the past 12 weeks she had been in work. Whilst she lost her tribunal claim, the Supreme Court ruled in her favour.
Does This Effect Your Business?
This ruling means all staff are now entitled to the same 5.6 weeks’ holiday entitlement per year, irrespective of how many weeks they work. This means of your employee only works two weeks of the year, you would still have to pay them the equivalent of 5.6 weeks’ paid leave.
But don’t panic – this update only impacts your part-year staff; workers who are hired on permanent contracts but only work for part of the year. This includes:
- zero- hours contracts
- seasonal contracts
- casual contracts
- agency contracts
- term-time-only contracts
- variable hour contracts
Can I still apply the 12.07% Rule?
Put simply, no. Traditionally the holiday pay calculation was worked out by multiplying the number of hours, days or weeks an employee worked by 12.07%. This percentage was used, as it is the number working weeks in a year (46.4) divided by the number of statutory weeks holiday entitlement (5.6).
This was great for employers as it made things easy, however it wasn’t always fair. Employees didn’t accrue holiday if they don’t work any hours in one week. Hence their holiday accrual could fall below the minimum statutory entitlement under the Working Time Regulations.
If you keep applying this approach you could face unlawful deduction from wages claims.
Holiday Pay Calculation Moving Forwards
You will now need to work out the average of your employee’s weekly earnings from the previous 52 weeks they worked. For staff that have a year-long contract but only work for part of that year, you need to ignore the weeks in which they have not worked.
You need to update your part-year employees’ contracts setting out their new entitlement. To ensure you are legally compliant you may need to:
- tell staff about the changes
- review and update you staff contracts
- review and update your policies to offer all staff 5.6 weeks’ paid leave
- change your method of holiday pay calculation
- compensate staff for holidays where you may have underpaid them
If this sounds stressful, get in touch. I can provide a HR solution that will review all your employee contracts and handbooks to ensure you are legally compliant. If you want to take this opportunity to review your entire HR function I can provide HR support which provides all the documentation, 24/7/365 support and advice and HR software. Send me a message if you’d like to find our more.