Almost all workers are legally entitled to 5.6 week’s paid holiday per year under the Working Time Regulations (WTR) 1998 (this is equivalent to 28 days for those who work five days a week). This is made up of the statutory minimum of four weeks’ annual leave and UK public holidays. A part-time worker is entitled to 28 days' holiday which is reduced pro rata, according to the number of days they work each week. The statutory paid holiday entitlement is limited to 5.6 weeks; however employers may provide their workers with additional holiday rights. The amount of holiday pay a worker is entitled to will depend on various circumstances including the worker’s salary and working pattern.
- How do you calculate holiday pay for workers?
Workers are entitled to be paid during their statutory annual leave at a rate of a week's pay for each week of leave. Holiday pay is calculated in accordance with the complicated “week's pay” rules contained in the Employment Rights Act (ERA) 1996. The amount of holiday pay a worker is entitled to receive can vary due to different factors. The below table explains how to calculate holiday pay for different types of workers:
Working pattern How to calculate a worker’s holiday pay Normal working hours Fixed hours and fixed pay (full or part time) i.e. normal working hours How much a worker gets for a weeks’ work under his/her contract of employment. No normal working hours Shift work with fixed hours (full or part time) The average number of weekly fixed hours a worker worked in the previous 12 weeks at their average hourly rate. No fixed hours (i.e. casual work) The average pay a worker got over the previous 12 weeks (in which they were paid). Note: A week’s pay is calculated using gross figures.
Where the amount of holiday pay is calculated with reference to a worker’s previous 12 weeks of work (i.e. shift workers and casual workers), a week where the worker has not received any payment will not be taken into account and earlier weeks where the worker has been paid shall be brought into account instead. Essentially the calculation will take 12 weeks into account only where the worker has received any payment.
- Holiday pay for term-time workers – can holiday pay be capped?
A common approach has been to say that a worker accrues holiday entitlement at the rate of 12.07% of the hours they have worked. This 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. Recent case law shows that this method may actually result in workers receiving less than their statutory entitlement and should therefore be used with caution.
- Brazel v The Harpur Trust
On 6 March 2018, the Employment Appeal Tribunal (EAT) held that holiday for term time workers cannot be capped at 12:07% of pay under the WTR 1998. In Brazel v The Harpur Trust the claimant, a visiting music teacher, worked at the school during term-time on a zero hour contract. The school calculated the claimant’s holiday pay, not using the calculation provided by the ERA 1996, but by applying the rate of 12.07% to the amount of hours the claimant worked in a term. By using this method, the school was in fact paying the claimant less holiday pay than if the school had used the calculation provided by the ERA 1996.
The school contended that the 12-week approach, as set out in the ERA 1996, gives proportionately more holiday pay than a worker who works throughout the year and thus unfairly rewards part-time workers. The EAT did not agree with this approach and held the school was wrong to cap the claimant’s holiday pay at 12.07% of her annual earnings. The EAT ruled that anomalies in the holiday pay calculation under the ERA 1996, which favoured workers who did not work throughout the year, did not justify words being read into the WTR 1998 or the statutory entitlement to holiday pay being capped at a percentage of the part-time worker’s annual earnings.
The decision in Brazel highlights the risk employers face if they use shortcuts instead of using the method of calculating holiday pay under the ERA 1996. Businesses who use a set rate to determine holiday pay for workers such as term-time workers or seasonal workers should ensure these rates do not result in their workers receiving less than their statutory entitlement under the ERA 1996.