Calculating holiday pay for zero hours, term-time only employees: what you need to know following the case of Brazel v The Harpur Trust UKEAT/0102/17/LA

In the case of Brazel v The Harpur Trust, the Employment Appeal Tribunal held that the ACAS guidance in respect of paying part-time employees and workers on irregular hours a maximum of 12.07% of their annualised hours for holiday pay is incorrect.

By way of background, this accrual rate derives from the fact that the standard working year is 46.4 weeks (that is, 52 weeks less the statutory 5.6 weeks holiday entitlement) and 5.6 weeks is 12.07% of 46.4 weeks.

Instead, they held that holiday pay for such employees and workers should be calculated in accordance with the Employment Rights Act by working out what would equate to a normal week’s pay based on the pay they received in the 12 week period prior to their holiday.

Facts of the case

Mrs Brazel was a part-time music teacher employed by a school run by The Harpur Trust. She worked mainly during term-time (which amounted to between 32 and 35 weeks a year) on a zero-hour contract. Her contract entitled her to 5.6 weeks holiday pay per annum, being the statutory entitlement under the Working Time Regulations 1998.

The Trust paid Mrs Brazel 12.07% of her annualised hours for periods of annual leave she took in instalments at the end of each term. Mrs Brazel argued that this was incorrect because she should receive holiday pay in line with the calculation under the Employment Rights Act, and subsequently brought a claim in the Employment Tribunal for an unlawful deduction of wages. This would result in her as a term time only employee receiving a higher percentage of annual earnings as holiday pay.

The Employment Tribunal held that there had not been an unlawful deduction of wages as a result of the 12.07% calculation the Trust had used because a principle for pro-rating should apply for part-time employees and workers who work fewer than 46.4 weeks per year.

However, the Employment Appeal Tribunal disagreed with this decision, finding that the usual calculation in the Employment Rights Act should apply for both part-time and full-time employees and workers. In particular, the Judge held:

“The Part-time Workers Regulations 2000 have as their overriding principle the concept that part-time workers are not to be treated less favourably than full-time workers. There is no principle to the opposite effect, and thus no basis for the judicial amendment of a statutory scheme [under the Employment Rights Act], the provisions of which are unambiguous”.

Claire Sleep, Partner in Ashtons Employment team, comments: “The decision of the Employment Appeal Tribunal in this case confirms that employers should calculate holiday pay for part-time employees and workers in accordance with the Employment Rights Act. That is, by working out their average pay in the 12 week period prior to their annual leave, rather than paying 12.07% for annualised hours.

“As an employer, you should be aware that this decision may leave you open to potential claims from part-time employees for unlawful deduction of wages if you have been using the 12.07% calculation. However, please note that any such claims are capped at a period of 2 years and an employee will be barred from bringing a claim if they do not bring it within 3 months of the last deduction.”