Holiday Pay
Employees are entitled to 5.6 weeks’ holiday under the Working Time Regulations 1998 (WTR). Calculating the holiday pay of someone with no normal working hours can be tricky. Some employers have adopted a percentage approach, by assuming that holiday accrues at a rate of 12.07% of hours worked. This is based on the following calculation: 52 weeks – 5.6 weeks’ holiday = 46.4 weeks; and 5.6 weeks is 12.07% of 46.4 weeks. The Supreme Court has looked recently at whether this is the right thing to do and what happens when an employee is both part time and only works at certain times of the year, for example on a term time only basis.
In Harpur v Brazel Trust, the employee was a visiting music teacher. She had a zero hours contract and her hours varied. She worked only during the school term which varied from 32 to 35 weeks. She was entitled to 5.6 weeks’ annual leave which she had to take during school holidays. No particular weeks were identified as being her holiday weeks, and she was paid in three chunks at the end of each term. The employer used the 12.07% method to calculate her holiday pay. The employee disagreed with how her holiday pay was calculated and brought a claim for unlawful deduction from wages and part time worker discrimination. Instead of the 12.07% method, the employee said the employer should have used the method contained in the WTR which involves calculating average pay over the previous 12 (now 52) weeks.
The Supreme Court said the averaging exercise set out in regulation 16 was a policy decision. Sometimes it would result in lower holiday pay, if calculated after a period of low hours, but this was ameliorated by the requirement to ignore weeks where no pay was received and look back further in time for a week where the employee was paid. The Court also confirmed that part-year workers, such as term time only workers, do not have their holiday entitlement pro-rated down from 5.6 weeks just because they don’t work all the weeks in the year.
The percentage method for calculating holiday pay has now been roundly rejected by the Supreme Court so employers should no longer use it. Holiday pay is calculated according to the WTR method, now an average over 52 weeks. Holiday entitlement accrues on the basis of the passage of time, not how much work is done. That means that there is a rather incongruous situation where weeks that are not worked (here, the school holidays) count for the purposes of accrual of holiday but are disregarded for any holiday pay calculation because the employee receives no pay.
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