In the case of Harpur Trust vs Brazel 2022, the Supreme Court has concluded that 12.07% holiday pay calculation method is incorrect, this has resulted in Acas no longer advising on this calculation method.
Harpur Trust vs Brazel 2022
Ms Brazel is a music teacher, employed by Harpur Trust. She works a variable number of hours each week and is only paid for the hours she teaches during term time.
Before September 2011, Harpur Trust calculated Ms Brazel’s holiday pay using the Calendar Week Method. However, the calculation changed to 12.07% of her hours worked at the end of each term multiplied by her hourly pay. Theeffect of this change was that Ms Brazel received less holiday pay.
The Harpur Trust argued that Ms Brazel’s leave should be pro-rated to account for weeks not worked. Because the WTR were enacted in part to implement the EU Working Time Directive, which remains “retained EU law” following Brexit, it argued that it must apply what it refers to as the “conformity principle” arising from EU case law on the Directive; namely that the amount of annual leave (and therefore holiday pay) should reflect the amount of work that Ms Brazel performs.
The Supreme Court concluded, that it was Parliament’s intention that the Calendar Week Method should apply to those workers with no normal working hours and that, even if that method sometimes sounds absurd it does not justify a whole revision of the statutory scheme.
Who is now affected by this change?
Workers that will be affected are those with irregular working patterns where their hours or days vary per week and/or their weeks vary per year. The biggest impact will be on hourly paid workers who have a permanent contract but have several unpaid non-working weeks during the leave year.
How to work out holiday entitlement with this change in mind?
The Supreme Court are yet to remove all legal uncertainties and therefore may cause difficulties. The government guidance recommends that workers who fall into the irregular working pattens or term time workers should work out their weekly pay by averaging their pay from the previous 52 weeks, if possible, but not considering any weeks where they were on holiday, not working or having unpaid leave.
If they have been employed for less then 52 weeks or start/ leave part way in the year, you would base your calculations on the data available to you.
Example from the government website for reference:
‘Week Gross pay per week Paid / unpaid week
Week 1 £300 Paid
Weeks 2-5 £350 Paid
Week 6 £0 Unpaid
Week 7 £10 Paid
Weeks 8-22 £100 Paid
Weeks 23-25 £0 Unpaid
Weeks 26-40 £400 Paid
Weeks 41-45 £200 Paid
Weeks 46-48 £0 Unpaid
Weeks 49-54 £180 Paid
Weeks 55-59 £150 Paid
An employer should discount weeks 6, 23-25 and 46-48, which is 7 weeks, as there was no pay in these weeks, reflecting that the worker performed no work. As 7 weeks have to be discounted, the employer must go back a further 7 weeks to take the total to 52 weeks of pay data when calculating holiday pay for this period. These extra weeks are weeks 53-59.
The total pay over the 52 weeks is calculated by summing the pay for each week. The calculation is:
(1 × £300) + (4 × £350) + (1 × £10) + (15 × £100) + (15 × £400) + (5 × £200) + (6 × £180) + (5 × £150) = £12,040.
This is then divided by the 52 weeks-worth of data used to calculate the average:
£12,040 ÷ 52 = £231.34.
A week’s holiday taken in the week following would therefore be paid at a rate of £231.34 (which is the average weekly pay from the pay data in table 5).’
What you need to do?
You will now need to review how you are calculating your holiday processes for those on irregular pattens and ensure that when employees take holiday leave, they are paid with an average of 52 weeks calculation, if available and paid the average amount.
If you feel that you need support in ways to communicate this to your staff as well as managing this new regulation, contact us at The HR Experts for advice.