Do you engage staff on zero hours or term-time only contracts?

A ruling by the Supreme Court has clarified the process of calculating holiday pay for part-year workers – this includes zero-hours staff. Here’s what you need to know:

The case in question

Mrs Brazel was employed on a permanent zero-hour contract to teach music part time. She worked predominantly during term time.

The employment contract allowed for 5.6 weeks holiday, mirroring her statutory right. Mrs Brazel’s holiday pay was calculated using Acas guidance at the time for casual workers, to pro-rata the proportion of the year worked.

For Mrs Brazel this would have been:

5.6 weeks (statutory holiday entitlement) / 46.4 weeks (number of working weeks per year less the statutory holiday entitlement) x 100 = 12.07% of her total pay.

In reality Mrs Brazel worked on average 32-35 weeks and argued that this calculation of 12.07% disadvantaged her.

If the school had instead calculated her holiday pay in line with the Working Time Regulations at the time of her employment, looking at a 12-week average of hours worked (ignoring non-working weeks), she should have been receiving more.

Mrs Brazel was unsuccessful in her initial claim; however, this was later overturned at an appeal tribunal.

The Supreme Court ruling

The Harpur Trust appealed to the Supreme Court who upheld the Court of Appeal ruling in favour of Mrs Brazel.

The ruling is significant as it provides clarity for employers on how to calculate holiday pay for those working part year or term time only, explaining that they cannot have their holiday pro rata as the Working Time Regulations do not allow it.

What does this actually mean for you as an employer?

All workers (note, this includes employees) should be getting 5.6 weeks’ leave, regardless of the number of weeks in the year they actually work, if their contract is ongoing.

You must look at the number of hours the employee worked on average over the last 52 weeks, ignoring weeks not worked, or the length of time they have worked for you if less than 52 weeks. (Pre- April 2020 it was 12 weeks, as referenced in the Harpur Trust case).

You will need to ensure you keep accurate records, so as to be able to calculate this average. It is especially important to note that only weeks in which work is performed should be included, and therefore weeks where no work is provided, but the contract continues, should not be included. This may mean going further back than one year (to a maximum of 104 weeks).

An incorrect calculation can result in underpayment, and as seen in the case of Mrs Brazel v The Harpur Trust, can subsequently end up at a costly employment tribunal.

Holiday pay calculations can be complex, if you would like an HR expert to oversee yours for peace of mind, please get in touch.

Moving forwards, you may need to reconsider your use of permanent zero-hour contracts, and if another type of contract or working arrangement is more suitable, such as fixed-term working or providing more regular work.