Holiday Pay: Harpur Trust v Brazel granted permission to proceed to the Supreme Court

On 19 June 2020, the Supreme Court granted Harpur Trust permission to appeal the Court of Appeal’s significant decision on calculating holiday pay for part-year workers. This decision especially impacted schools who employ many individuals for term time only and relied on applying the customary rate of 12.07% to calculate holiday pay for part-time and part-year workers, which the Court of Appeal ultimately held was incorrect.

The Supreme Court’s decision to allow the appeal will come as a relief to many employers and we explore the possible implications below.

For a full in-depth analysis of the case, please refer to our previous article which explores common questions that employers have with the decision, here.

The case concerned the holiday entitlement and pay of a visiting music teacher who worked term time only. A worker has a statutory right to 5.6 weeks’ holiday a year. This means that a 52 week a year worker accrues 5.6 weeks paid holiday for each 46.4 weeks worked, i.e. at a rate of 12.07%. Following ACAS and Government guidance, the Trust calculated Mrs Brazel's earnings at the end of each term and paid her 12.07% of her earnings.

Mrs Brazel Argued that the 12.07% calculation does not comply with the calculation required under the Working Time Regulations 1998 and that this should be calculated in accordance with the Employment Rights Act 1998 (ERA), that is at the level of her average earnings over the 12-week period immediately before holiday was taken. She argued that nothing within the relevant provisions required a different approach for employees who did not work the full year.

The Court of Appeal held that despite not working the full year, Mrs Brazel was still entitled to 5.6 weeks holiday. Therefore, her holiday pay should not be limited to 12.07% of her salary, but had to be calculated at the end of each term based on average earnings over the last 12 remunerated weeks, as required by the relevant provisions. This calculation results in a higher rate of pay for their holiday of 17.5%.

The decision therefore confirmed that it does not matter that a part year worker had a higher accrual rate, and employers simply had to follow the normal methodology for any worker based on ERA formula. As such, the holiday entitlement of part-year workers on permanent contracts should not be prorated to that of full-year workers, to reflect the fact that they do not work throughout the year.

This decision had a huge impact on this developing area of law and caused concern amongst many employers who were understandably worried about an influx of unlawful deduction of wages claims from employees affected by this decision. An appeal of the decision was always expected due to the lack of clarity and significance of this complex and widespread legal issue.

Although a hearing date has not yet been listed, a final decision on this issue from the Supreme Court will therefore be welcomed by many employers. In the event that the Court of Appeal’s decision is overturned, the practice of calculating holiday pay as 12.07% of pay for part year workers could be reinstated. If the decision is upheld, employers will need to change their practices going forward, if not already done so, and seek legal advice if they are faced with a similar claim from an employee.