The Supreme Court has held that holiday entitlement for workers should not be pro-rated where a worker only works for a part of the holiday year but remains employed for the whole holiday year (or for longer than the part-year period when they were actually working).
The employer in the case before the Supreme Court had used an approach contained in old Acas guidance (which has since been amended) that capped a worker’s annual leave entitlement for a part-year worker at 12.07% of the worker’s annualised hours (the “12.07% approach”).
The employer’s appeal was based around the argument that it was necessary for fairness to reduce the part-year worker’s holiday entitlement on a pro-rata basis to avoid an unjust result, as compared to full-year workers, and this was achieved by using the 12.07% approach.
Whilst the Supreme Court acknowledged that in some cases the part-year worker could benefit if their holiday entitlement was not pro-rated, this did not justify the use of the 12.07% approach as the 12.07% approach is inconsistent with the methods for calculating both holiday accrual and holiday pay contained within the applicable legislation (The Working Time Regulations 1998 and Employment Rights Act 1996).
As well as term-time workers, this decision will impact workers engaged via zero hours contracts where they work irregular hours throughout the year, especially those workers who may only actually perform work for certain parts of the year such as seasonal workers.
Employers who use the 12.07% approach are likely to be calculating holiday pay incorrectly and risk claims for unpaid holiday pay (usually pursued as a claim for an unlawful deduction from wages).
This judgment may lead many employers to review both their contractual provisions relating to holiday pay for workers engaged on part-year or zero hours contracts and also their approach to calculating both holiday accrual and holiday pay.
Harpur Trust v Brazel
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Posted on July 22, 2022
