Posted Date: 26th July 2022

The ruling

Following the recent case of Harper Trust V Brazel, the Supreme Court has ruled that paid holiday entitlement for part-year workers on permanent contracts should not be pro-rated for the weeks they don’t usually work.

The Court also deemed the 12.07% method for calculating accrued holiday as invalid, as the Working Time Regulations do not make reference to it, and it can leave some workers worse off. This method calculated built up holiday entitlement in proportion to the hours worked and was previously recommended by Acas, although its guidance has now been re-written, and is still widely used by employers.

The Court stated that, under the regulations, all workers under a permanent contract are entitled to the full statutory holiday entitlement of 5.6 weeks’ holiday per year.

This means that, under this ruling, an employee who works five days a week but for only five months of the year under a part-year contract would receive the same holiday entitlement as an employee who works five days a week for the whole year.

So how do you correctly calculate part-year holiday entitlement and pay?

Although part-year workers are entitled to the statutory minimum of 28 days (or 5.6 weeks), the precise number of days will be based on their normal working pattern. For example, if a worker normally works four days per week, the calculation is 28 days ÷ 5 x 4 = 22.4 days.

Holiday pay should be based on their average pay over a 52-week reference period before the annual leave, ignoring any weeks where there were no pay and taking into account earlier weeks to make up the 52.

Casual, zero and varied hours contracts

This ruling has no impact on part-time workers with set working hours, i.e. two days per week. However, it does potentially apply to employees on casual hours, zero hours and variable hours contracts if they work year-round, and not a short, fixed term assignment. Meaning that a worker on a zero-hour contract who works six months of the year in total, would be entitled to the full statutory holiday entitlement.

This doesn’t appear fair, both for the employer who now has a higher payroll bill, and for the other full time employees.

So, what can employers do?

If zero or causal hours works best for your business, consider moving the affected employees onto fixed term contracts for each period of work they complete, so a new zero or casual hours contract is signed at the start of each assignment.

If the workers rarely work full time, could you agree normal part time hours, so their holiday entitlement can be calculated based on their normal working pattern?

Or, if possible, provide more regular work under a part-time or full-time contract.  

For further support on this subject, please contact us.