Term Time Workers/Employees and Holiday Pay – begin to consider the the 12.07% roll up in light of case law ruling in August 2018.
A recent Employment Appeal Tribunal case has provided guidance about the way in which schools and other organisations such as nurseries and play groups who use term time only working patterns should calculate holiday pay for term-time workers.
This decision may affect you if you pay holiday pay for term-time or casual workers at a rate of 12.07% of a term’s pay. The recent ruling though may yet well be appealed, so this position may change again (not very helpfully).
Common practice amongst a number of employers with term time only employees has been to calculate holiday pay on a pro rata basis to the proportion of the year worked. If employees are entitled to 5.6 weeks’ annual leave (the statutory minimum entitlement under Working Time Regulations), this would have meant paying holiday at a rate of 12.07% of a term’s pay (being 5.6 weeks divided by 46.4 weeks (ie 52 weeks – 5.6 weeks holiday)).
This recent case, Brazel v The Harpur Trust – the employer (Harpur Trust) calculated the holiday pay of the claimant, Mrs Brazel, a visiting music teacher, on the previous basis set out above (and as recommended by ACAS). However the Employment Appeal Tribunal (EAT) has confirmed that this is not the right way to calculate term time workers/employees holiday pay. The EAT decided that that holiday pay should be calculated on a 12-week average of pay from weeks actually worked.
This means that term time workers may well be paid more for holidays than year long workers – as the EAT found that there is no law that would prevent their more favourtable treatment! For now, you might wish to wait until an appeal is accepted before taking immediate action, but one to begin to consider in the short term in case the appeal is declined.
For any queries regarding holiday pay or calculations, please just get in touch.
If you are interested, read on, here’s the case story…..
Mrs Brazel worked as a visiting music teacher for The Harpur Trust, mainly during term time, on a zero hours contract. Her contract of employment entitled her to 5.6 weeks’ annual leave, which she was required to take outside of term time. The Trust paid her 12.07% of the term’s accrued hours at the end of each term, in three instalments. They argued that they had followed non-binding ACAS guidance which gives this as the correct approach for calculating holiday pay for casual workers and suggests doing the same for term-time only workers.
Mrs Brazel made a claim about the amount of holiday pay she got, her argument was that the ACAS guidance for term-time workers provided “inaccurate results”.
Initially, the Employment Tribunal (ET) found against Mrs Brazel. The ET agreed that a part-time employee who works less than the standard 46.4 week working year should have their holiday entitlement pro-rated to avoid an unfair “windfall”. If they had not done so, this could mean that Mrs Brazel would have got holiday pay of 17.5% of annual earnings. This would have been more than a comparable full-time worker who worked throughout the year.
At appeal, the EAT decided Mrs Brazel was right. The reasons for that were:-
That the whole purpose of provisions such as the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 is “to ensure that part-time workers are not treated in a less favourable manner than full-time workers”. There are no provisions to ensure that full-time workers are treated as favourably, or to prevent a “windfall” for term-time only workers. As a result, there is nothing in law they found that required a pro-rating exercise in relation to part-time holiday pay.
The EAT found that the “simple and straightforward” way to calculate holiday pay for someone with irregular hours, is to calculate a week’s pay on the amount of an employee’s average weekly remuneration in the preceding 12 weeks, discounting any week in which no pay was made.
This decision, the EAT acknowledged may cause “anomalies” in respect of the amount of holiday pay paid to term-time workers. Those who work fewer weeks during the year would in fact receive more holiday pay than those who work the full number of weeks.
As frustrating (and in the words of the Employment Tribunal “perverse”) as this might feel for schools, the EAT has put a clear marker in the sand as to how holiday pay for term-time workers should be calculated: an average of the previous 12 weeks’ pay should be paid during statutory leave entitlements.
If you pay holiday pay for term-time or casual workers at a rate of 12.07% of a term’s pay, this decision could have a significant impact on your current practices. As the decision may still be appealed, it may be prudent to wait to see whether an appeal is granted and if so what the outcome of that appeal is. In our opinion, it is definitely worth considering matters now.