Supreme court rules on part-time workers’ holiday pay

In a landmark case the Supreme Court has ruled that part-time workers should not have their paid holiday pro-rated.

This decision in the case of Harpur Trust v Brazel has wide-reaching implications for any care company that engages zero-hours or part-year workers, that is, workers on permanent contracts who do not work the entirety of the year.

The need for paid holiday is a fundamental part of an employment contract and Article 2(4) of the European Social Charter highlights it as a condition for just work.

In addition, the Working Time Regulations give workers the right to 5.6 weeks’ holiday a year – that is every 52 weeks.

For ad-hoc, zero hours and term-time workers, it’s long been common practice for employers to calculate holiday pay as 12.07% of hours worked.

This calculation comes from taking the 52 weeks in a year and subtracting the statutory 5.6 weeks to give 46.4 actual working weeks. From there, 5.6 weeks’ holiday out of 46.4 possible working weeks works out at 12.07% of hours worked.

Boiling it down, this means for every hour worked, roughly seven minutes of holiday is accrued.

The problem with using this ‘percentage of time worked’ approach for part-year workers is that when no hours are worked in a week, no holiday is accrued, so accrual sometimes falls short of the statutory minimum entitlement under the WTR.

Commenting on today’s announcement by the Supreme Court, Lesley Rennie, principal employment solicitor at WorkNest, said: “This ruling means many employers will need to immediately change their holiday pay practices. This includes those who employ permanent zero hours, ad-hoc or term-time workers, have applied the 12.07% formula to calculate holiday accrual and who have either waited for the finality provided by the Supreme Court’s decision or who have, up until now, been unaware of this case. The change is required to prevent any underpayment of holiday going forward and to mitigate the risk of claims from employees arising in the future.

“But that is not all. Employers will also need to assess their historic liability and make a judgement call on whether to make a back-payment in respect of any holiday pay underpayments or to bear the risk of a claim. Employers should be mindful that if this case is widely reported, employees are more likely to be aware of it and assert their rights.

“In making their assessment, employers will need to give thought to how far back a particular worker may be able to claim in respect of historic underpayments. But generally, where a worker brings an unlawful deduction from wages claim based on a series of deductions from an ongoing pattern of incorrect holiday payments, an Employment Tribunal can only look back at the two years preceding the unlawful deduction from wages claim being brought.

“Employers will also need to assess their overall financial liability which, together with potential litigation costs, projected lost management time and the risk of adverse publicity, will colour their decision on how to address the underpayments.”

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