Calculating holiday pay? Clear as mud!

Last year, Lord Justice Nicholas Underhill handed down the long awaited judgment in the case of Brazel. The case concerned a visiting music teacher employed on a zero-hours contract at Bedford Girls School. Ms Brazel’s contract entitled her to the full time equivalent of 5.6 weeks’ annual leave which she was required to take during the school holidays. The school calculated her holiday pay at the rate of 12.07% of hours worked in a term. 12.07% is recommended by ACAS within their holiday pay guidance.

The Employment Tribunal’s decision

Under regulation 16 of the Working Time Regulations (“WTR”) and sections 221-224 of the Employment Rights Act 1996, Ms Brazel claimed that her holiday pay should have instead been calculated using her average weekly earnings over the 12 weeks immediately before her holiday.

The school successfully argued that the statutory entitlement of 5.6 weeks should be pro rated if an employee works less than the standard 46.4 week working year as otherwise full time staff would be treated less favourably than part-time workers. To this end, the tribunal found that words should be read into the WTR in order for it to be “just”. Ms Brazel then appealed this decision to the EAT.

The EAT

The EAT held that Ms Brazel’s holiday pay should have been calculated using the 12 week averaging method as advocated by the WTR. It was recognised that although this could result in anomalies in favouring certain staff over others, the legislation was very clear. The school appealed.

The Court of Appeal

The Court of Appeal upheld the EAT’s decision and rejected the school’s position that a pro rata principle should be applied to the accrual of holiday for “part-year” workers.

The main difference between how holidays are counted for staff that are not full time depends on whether they can be considered to be “part-time” staff or whether, instead, they are “part-year” staff.

What does this mean in practice?

The Court of Appeal differentiated between “part-year” staff and “part-time” staff. Part-year staff are generally staff such as teachers who only work during set times of the year and have their holiday during the school holidays, for example.

Brazel confirms that a “part-year” worker’s holiday allowance cannot be pro rated. If on the other hand staff can be considered “part-time” then the case of Russell sets out that the pro rata principle does apply and therefore the holiday allowance is proportionate to the amount of hours that are worked.

In order to calculate holiday pay for part-year workers, the average weekly remuneration should be taken for the 12 weeks prior to the calculation date and then multiplying this by 5.6 weeks (4 weeks’ legal minimum and 8 days’ bank holidays). The 12 week referencing period increases to 52 weeks in April 2020 when the Good Work Plan is implemented.

This article is not intended to be legal advice and is merely intended for information purposes. For more information, please visit ACAS’ guide to holiday entitlement and the Government’s help page with includes tools such as the holiday pay calculator.

If you require advice in respect of any business or employee related matter, please contact our experienced Employment Lawyers or Business Services Lawyers on 01202 525333.