Insights
The Court of Appeal has held that an employment tribunal was wrong to read words into regulation 16 of the Working Time Regulations 1998 (WTR 1998) to the effect that "part-year workers" (those working only part of the year) but whom are employed on permanent contracts and, therefore retained between periods of actual working, should have their annual leave entitlement capped at 12.07% of annualised hours.
Background
An Employment Tribunal originally ruled in favour of the Trust but then the Employment Appeal Tribunal overturned this decision. On further appeal to the Court of Appeal, it was decided that the WTR did not require leave for workers like Ms Brazel to be reduced pro rata.
In this case, Ms Brazel, a visiting music teacher at Bedford Girls School, was employed by the trust on a term time only, zero-hours contract. Her holidays were calculated on the basis of 12.07% which was in accordance with a method for calculating holiday pay for casual workers as recommended by ACAS.
She believed that holiday pay should be calculated by taking the average weekly remuneration for the 12 weeks prior to the calculation date and multiplying it by 5.6.
As she worked around 32 weeks per year, using this calculation brought her holiday pay to around 17.5% of annual pay, compared with 12.07% of annual pay for staff working the whole year.
The calculation exercise required by regulation 16 of the WTR 1998, which involves identifying a week's pay and multiplying it by 5.6 weeks, has been deemed to be straightforward and should be followed, even if it results in part-year workers receiving a higher proportion of their annual earnings as holiday pay.
In his judgement, Lord Justice Underhill said, “It may at first sight seem surprising that the holiday pay to which part-year workers are entitled represents a higher proportion of their annual earnings than in the case of full-year workers, but I am not persuaded that it is unprincipled or obviously unfair.”
What this means for you
Given the potential impact of this decision, varying sources have been contacted with regard to the way forward including ACAS, CIPD (Chartered Institute of Personnel and Development) and leading law firms and it has been accepted that this judgement establishes the law on this matter at the present time. The Government are yet to provide guidance as a result of this case and there is no timescale given for this. It is also currently unknown whether there is to be a further appeal to the Supreme Court.
On the basis of entitlement to 5.6 weeks holiday, pay for each week will reflect the hours employees have actually worked over the preceding 12 weeks to provide a weekly average. That amount will be their ‘week’s pay’ and if they take a week’s holiday, they will receive that amount. However, if they want to take less than a week’s leave, their week’s pay must be divided by the correct multiple. A week is divided by five, so each part of a week will amount to 0.2.
With effect from April 2020, there will be a requirement to look back at the last 52 weeks of actual working to calculate holiday.
An employer who has employees for whom they calculate holiday entitlement using the 12.07% calculation needs to now consider what action they are going to take.
If you require further advice or guidance on this subject, please request a call back from Alcumus PSM to see how we can help you.
Alcumus PSM (People & Safety Management) specialises in human resources and health and safety consulting for small and medium-sized enterprises.
