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Expert Insights

20 July 2022

Part-year workers favoured in Supreme Court holiday pay ruling

This case concerned how holiday pay should be calculated for someone who works part of the year but has a permanent contract in place. It does not concern those who work part of the year but have no contract in place in between contracts e.g. typical zero hours workers or casual workers.

Mrs Brazel works under a permanent contract on a zero hours basis as a visiting music teacher. She is only paid for the amount of work carried out which is term-time only and does not work during the school holidays so she only works part of the year but the contract is in place permanently. She is entitled to 5.6 weeks holiday which she is required to take during school holidays and her employer makes three equal payments in respect of holiday at the start of each term. Following ACAS guidance, the employer calculated her holiday pay on the basis of what she had earned the previous term at the rate of 12.07% of her pay. However, the argument put forward and accepted by the EAT, Court of Appeal and now the Supreme Court is that the legislation does not require part-year workers to have their annual leave capped at 12.07% of annualised hours. The calculation required involves looking at average earnings over the previous 12 weeks (this has since changed to 52 weeks) which in her case resulted in holiday pay of about 17.5%. The Courts have held that there is nothing that prohibits this and the Supreme Court found that a slight favouring of workers with a highly a typical work pattern is not so absurd as to justify the wholesale revision of the statutory scheme set out in the Working Time Regulations.

This will have a significant impact on those who work part-year/term time only under a permanent contract and any other arrangement such as zero hours employees/workers or casual workers who have an umbrella contract arrangement in place when they are not working. It will make holiday pay much more expensive for employers who have this type of arrangement and is most likely to affect those in the education sector. Although this effectively can result in a “windfall” for the particular workers – these do tend to be those who are lower paid and don’t have regular guaranteed hours. It is one of the few examples of a situation where a part time worker is treated more favourably than a full time worker and currently there is no legislation that prohibits this.

This could open the floodgates for other part-year permanent workers who have had their holiday calculated incorrectly to bring claims for unlawful deductions from wages for any difference in what they have been paid and what they should have received although there is a two year backstop on these claims.

One possible result is that employers may try to reduce holiday pay by engaging these workers on a zero hours or casual workers contract for short periods of time with no umbrella contract or permanent contract in place for the periods not worked so that they calculate holiday pay on the 12.07% basis.

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