Limited Effect of the Decision

The majority of staff are not effected as the decision only applies to those who fall within the criteria set out below. It does not affect the holiday entitlement nor pay of permanent full time or part-time staff who have regular hours even if they are required to take their leave during, say, the school holidays. Using ways to calculate holiday pay which are simple to administer but legal may continue for those who are not effected.

However, Managers should review the method they use to calculate the holiday pay of staff with irregular hours or zero hours. For example, using a calculation of 12.07% of salary to determine the leave entitlement and payment, although simple, is not legal. Failure to review your method of calculating holiday entitlement and pay may result in claims to an employment tribunal for any shortfall in pay.

Effected Staff and Resolution

Effected staff fall within the following type of holiday and pay arrangements.

• term-time workers – whose contract remains in being throughout the year but their hours are irregular during term-time and are part-time e.g. may vary each week – even if they are required to take their annual leave during the school holiday periods.
• zero hours staff employed under an on-going contract in which the individual’s hours are irregular and part time.
• Irregular hours in which the hours vary greatly from week to week and their part time contract remains in being across the year.

The key point is that such individuals are not casual staff i.e. their contract is not a turn and turn off type of arrangement i.e the contract continue across a long period including any any weeks in which no hours are worked.

Holiday Entitlement and Pay

Consider the following. Part time staff who work irregular hours are entitled to 5.6 weeks holiday leave each full year and not subject to a pro-rata method that would reduce their entitlement. That is a statutory right. Individuals who work irregular hours are likely to work very variable hours each week. Even so, their holiday entitlement and pay is defined in law. It must be based on the individual’s:

Holiday entitlement – the statutory entitlement is 5.6 weeks holidays per annum – see below.

Payment for their holidays – must be based on his/her average earnings during the last 52 weeks before the leave period.  If any weeks were not worked in those 52 weeks, you need to take a longer period until you have 52 weeks of earnings to arrive at the average pay per week. The ’52 worked weeks’ are your reference period to calculate the average earnings per week for holiday pay. You do not have to go back beyond a period of 104 weeks to identify additonal worked weeks to make up 52 worked weeks.

The average earnings should also include: commission earnings, guaranteed or regularly worked overtime.

For individuals who have been employed less than 52 weeks, on the holiday pay calculation date, you should use the number of complete weeks for which the individual has been employed to calculate the average earnings. .

The Supreme Court recognised that the effect of the legislation and their judgement was that such staff would receive a slightly higher leave allowance than say part-time staff with regular hours. Knowing that, the Court ruled that the legal requirement is that part-time staff with irregular hours should receive their statutory holiday enitlement of 5.6 weeks x their average weekly pay in accordance with the Working Times Regulations 1996 as amended.

That entitlement to leave and the rate of payment is a statutory right. You should recalculate holiday pay of effected staff and pay any shortfall. Failue to pay the shortfall may result in a Tribunal claim against your organisattion. At the time of writing this article, there would appear to be a 3 month time limit, from the last shortfall, within which a claim must be made to a Tribunal. In general, the amount of pay recoverable will be limited to the last two years – but that depends on the particular facts..

If you use a payroll service or software. it should be practicable to extract the earnings for such staff and calculate their holiday pay over the appropriate reference period. If not, it will be a irksome but necessary task to perform.

Consider New Cost Effective Options

Is it really effective to rely on zero hours or casual staff to cover short staffing? Such staff often lose their dexterity and familiarity with your operations, cusomter preferences etc. and thus take longer to work up their speed and keep their knowledge topped up. It may be more effective to consider different contractual arrangements to ensure that you have trained and competent staff available who would like to work irregular hours.

If that makes sense in your organisation, consider a new contractual arrangement which meets your service needs. The article below, although an older one, still gives ideas to consider.

Balancing the Need for Operational Flexibility and Staffing Flexibility unlike Sports Direct

Remember that if you start to favour irregular or zero hours arrangements, you will need to ensure that you apply the correct calculations for holiday pay and leave.

It is likely that other cases will arise about the application to other contractual arrangements. The Courts will have to come to a decision taking account of the legislation and the ruling of the Supreme Court.

Notes

[1] Harpur Trust v Brazel [2022] UKSC 21

[2] The original legislation about payment and entitlement to holidays was made under the health and safety provisions.  The aim was to encourage individuals to actually take holidays and be paid at that time as an incentive to do so.

The particular facts of the case may help to understand the logic.   The claimant was a part-time music tutor who was employed to teach students requiring such tuition each week during term-time.  The number of students would vary as would her hours each week.  Her contract continued across the whole year even though she was required to take her holidays during school holidays and her holiday pay was paid three times per year at the end of each of the school terms.

In the case of a school, it is likely that only a small number of staff will be affected by the decision and the extra work on calculating holidays for those individuals. 

© 2022 Jim Harrington, HR Management Dimensions