The Supreme Court’s decision in Harpur Trust v Brazel is hugely significant. It will place a substantial financial burden on thousands of organisations, with the potential of running into millions of pounds.
The education and care sectors will be particularly impacted, where part-year and term-time contracts are commonplace.
To avoid costly employment claims, your business needs to act now.
The issue in dispute was whether music teacher, Ms Brazel, engaged to work part of the year on a continuing contract, was entitled to at least 5.6 weeks’ statutory holiday, or a pro-rated allowance to reflect the number of weeks she’d actually worked.
The Supreme Court’s Decision
The Supreme Court unanimously dismissed the school’s appeal. It made it clear that all part-year workers are entitled to 5.6 weeks’ paid holiday each year. And workers, like Ms Brazel, whose pay varies, must have their holiday pay calculated in accordance with the formula for a “week’s pay” set out in the Employment Rights Act 1996.
Under UK law, holiday pay for people working irregular hours is determined by averaging their pay over the previous 52 weeks. Weeks where no work takes place are ignored in the calculations.
Why Do You Need To Act Now?
This ruling will mean that tens of thousands of workers, engaged in permanent part-year contracts, who’ve been underpaid, could bring employment claims against you to recover the amounts.
It’s very important that you take steps immediately to change your holiday pay practices and make sure your staff receive the correct number of holidays and pay.
You must ensure that every worker you employ receives at least 5.6 weeks holiday each year. The only circumstances where you can lawfully pro-rate a worker's holiday is where they start or end their employment part way through your relevant leave year.
This means that anyone you employ on a continuing contract must also receive 5.6 weeks holiday - even if they only work for a few weeks each year. That will include term-time workers, many bank workers and workers engaged under umbrella contracts.
This decision doesn't mean that you’ll be liable for all underpayments. There are various legal arguments that you can deploy to limit your liability. Plus, the Deduction from Wages Regulations 2014, limits how far back an employee can go when claiming a series of deductions to two years from the date the claim is presented.
As a rule of thumb, you’ll need to work on the basis that you could be liable for up to two year's underpayments for your staff.
Get In Touch With Us
This area of law remains complicated for employers to navigate. If you need help with changing the terms and conditions of your term-time workers to comply with this decision, we can support you to limit your potential liability.
Please contact our employment team for more advice.