In Harpur Trust v Brazel, a music teacher worked for a school under a permanent contract on a zero-hour basis. She provided music lessons during the school terms, at a varying number of hours each week, and then usually did not carry out any work during the school holiday periods.
It was accepted that under her contract of employment she was entitled to 5.6 weeks annual leave as a permanent staff member with a contract that ran for the full year. By agreement, she took her annual leave during the school holiday periods, equally divided into three blocks (1.87 weeks during each holiday, in effect). No specific weeks were designated as her annual leave, however. She received her holiday pay at the end each term.
The dispute was principally boiled down to one question: what is the proper mechanism for calculating the accrual of annual leave and the amount of holiday pay due?
The decision in Harpur confirms that employers are not to derogate from the wording of the Working Time Regulations (WTR) when calculating holiday entitlement and pay for staff, regardless of how many hours or days they work in each year.
Annual leave entitlement: 5.6 weeks
Permanent staff are entitled to 5.6 weeks of annual leave. This entitlement accrues with the passage of time, not with the number of hours or days worked. As such, these 5.6 weeks are not to be pro-rated for permanent staff who work fewer days per week.
However, whereas 5.6 weeks will represent 28 days of annual leave for those who work five days a week full-time, for those who work fewer days a week the equivalent 5.6 weeks for them will amount to fewer days of annual (e.g. for someone working 2 days a week, this would equal 11.2 days of annual leave).
For those who are on temporary contracts that only run for part of a year, the 5.6 weeks may still be pro-rated, but only by reference to the amount of the year worked (e.g. 2.8 weeks for a 6 month contract). Pro-rating in this way can also be done for permanent staff who join or leave the organisation part way through the organisation’s holiday year.
Holiday pay: ‘week’s pay’
Holiday pay should still be calculated by looking at the staff member’s last 52 weeks worked to ascertain the average week’s pay. Alternative methodologies — such as the ‘percentage method’ where holiday pay is calculated based on a percentage of days/hours work — should not be used as they are not compliant with the Working Time Regulations.
Employers must discount any weeks in the 52-week period where the staff member did not work, and instead draw in previous weeks — going as far back as 104 weeks if necessary.
Once the average week’s pay has been calculated this way (the ‘Calendar Week Method’), this can then be applied to the leave period being taken. If a full working week is taken as leave, then the week’s pay should be paid. If more or less is taken, then the week’s pay will need to be adjusted proportionately.
Where a staff member works only 2 days a week and takes 1 day of leave, for example, then they would be entitled to 50% of a week’s pay for that leave. This equates to 0.5 weeks of the 5.6 week entitlement.
Conclusion The ruling in Harpur reaffirms the traditional position, that the Calendar Week Method should be used to calculate holiday pay. All permanent workers are entitled to the equivalent of 5.6 weeks annual leave, with holiday pay being calculated by reference to the average week’s earnings over the last 52 weeks of working. For annual leave entitlement, any weeks where the staff member does not work has no impact on their 5.6 weeks entitlement, whereas for the calculation of holiday pay those weeks of non-working are discounted when calculating week’s pay.
The bottom line of this is that the approach to handling holidays for permanent staff with fixed days/hours, whether full-time or part-time, should still be straightforward. The complexity comes with irregular hours workers and zero-hour staff. For those staff members, employers should still use the Calendar Week Method, albeit this can cause some unusual results.
e.g. if a member of staff on a permanent contract works for 5 full weeks (mon-fri, 9-5pm) and then does not work again until the same 5 weeks in the following year, they are entitled to 28 days of leave (5.6 weeks), paid as per their average week’s pay for those 5 weeks worked. This means that after working those 5 weeks, the member of staff then gets 5.6 weeks of holiday pay. Staff on zero hours or irregular hours can therefore benefit greatly from this arrangement, more so than their regular hours colleagues. The Supreme Court has made it clear that the Working Time Regulations do not prohibit this outcome. Employers are advised to review any irregular hours contracts they have with their staff. In some cases, it may be appropriate to consider using successive fixed-term contracts to avoid the 5.6 weeks entitlement accruing. However, if this arrangement continues for over 4 years, the fixed-term contract may become permanent by operation of law. Alternatively, employers would need to consider being more cautious with how hours are allocated on an irregular hour contract — ensuring that hours are spread thinly across working weeks rather than worked in ‘bursts’ in particular weeks — so that some measure of control can be maintained over how many days/hours constitute the average working week, and the average pay for those weeks.
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