Prior to the case of Harpur Trust v Brazel, employers were using the 12.7% of hours worked rule when calculating holiday pay where staff worked irregular hours. In this case, Brazel (B) was an employee working under a zero-hours contract who worked approximately 32–35 weeks per year. When calculating her holiday pay, Harpur Trust (HT) calculated her holiday pay at 12.7% of the hours worked. HT argued that the statutory entitlement to annual leave should be pro-rated for an employee who worked fewer weeks than the standard 46.6 weeks in a working year. B disagreed with this method of calculation and brought a claim for underpayment of holiday pay.
At first instance, the Employment Tribunal rejected the claim. B appealed to the Employment Appeal Tribunal. They reversed the original decision, saying pro-rating was not appropriate and citing the wording of the Working Time Regulations which stated weeks as the reference period. HT appealed to the Court of Appeal. In May 2019, CA ruled that HT's holiday pay calculation, using 12.7% method was unlawful and confirmed the average over a 52wk period method. This was later enacted in law. But before its introduction, HT appealed to The Supreme Court.
How many paid annual holidays are employees entitled to?
The Supreme Court issued its verdict on July 19th, 2022, upholding the CA decision. They acknowledged that EU caselaw states that a worker’s annual holiday entitlement is decided by the number of weeks they worked. However, that did not prevent individual nations from offering enhanced provisions (noting that we are no longer part of the EU). Under UK law, holiday pay for people working irregular hours is calculated by averaging their pay over the previous 52 weeks (this provision was enacted by Parliament before this decision was delivered). Any period where work has not taken place is ignored. This means 52 weeks of actual work activity. Although the Court felt this method was slightly favourable to workers with irregular hours, it rejected the argument that such a method of calculation generated an absurd result, calling for an overhaul of the current statutory scheme.
The Supreme Court has confirmed that when calculating holiday pay for employees under zero-hours contracts, those who work term-time or whose hours vary, the correct method is to decide the average pay over a 52-week reference period, ignoring periods when no work is undertaken. This can be a minefield to understand, calculate, and implement. It is therefore important that employers obtain proper advice and aid to ensure they are compliant and avoid underpayment claims.
Quest can offer you not only the first advice and guidance, but also a bespoke consultancy service to ensure your policies and practises are up to date and compliant. Please do not hesitate to call us on 01455 852028.
