Calculating holiday pay for part-time employees – Brazel v The Harpur TrustPrint publication
This is a helpful case for employers who engage part-time employees and workers on irregular hours, perhaps as casual or bank staff or on zero-hours contracts. Calculating holiday pay for such staff can be very difficult. The Employment Appeal Tribunal (EAT) has confirmed that the established practice of paying 12.07% of annualised hours for such staff is not correct.
Mrs Brazel was employed by The Harpur Trust as a part- time music teacher. She worked primarily during term time and worked under a zero-hours contract. Her contract of employment entitled her to 5.6 weeks annual leave (in line with her statutory entitlement) which she was required to take outside of term time.
The Trust paid her 12.07% of her annualised hours for periods of annual leave in three instalments at the end of each term. Mrs Brazel complained that this was incorrect and that she was being underpaid during her holiday periods.
The Employment Tribunal found that adopting any calculation approach would give Mrs Brazel an unfair windfall because she did not work for the standard 46.4 week working year (i.e. 52 weeks less 5.6 weeks statutory leave). The Trust had relied on ACAS guidance that supported the principle of paying 12.07% (5.6 weeks divided by 46.4 weeks) of annual hours for casual employees and the Employment Tribunal agreed this was the correct approach. It commented that do otherwise would result in Mrs Brazel receiving around 17.5% annualised hours as holiday pay which was more than a comparable full-time employee.
The EAT disagreed with the Employment Tribunal and found in Mrs Brazel’s favour. It found that the correct calculation for someone who has no normal working hours is to apply section 224 of the Employment Rights Act 1996 and work out her normal week’s pay based on the pay received in the 12-week period prior to taking annual leave. On the point of this resulting in an unfair windfall that effectively meant that employee might receive more than a comparable full-timer, the EAT recognised that this was the case but, nonetheless, the legislation was unambiguous.
Many employers currently adopt the approach of paying 12.07% annualised hours as holiday or increasing hourly rates by 12.07% to include an element for holiday pay for irregular workers. This case confirms that the correct approach is to work out the average pay in the 12-week period prior to the holiday being taken.
This decision means that this approach could leave employers open to claims for unlawful deductions from wages covering the previous two years although, of course, any holiday pay that has been paid will be set off against any claimed amount.
This case underlines the care that employers need to take when working out holiday pay for part-time workers and others receiving bonus, commission and overtime payments.