Employment Insight: Holiday update

Mrs Brazel was a visiting music teacher at a school run by the Harpur Trust (the Trust). She was a worker employed under a permanent contract on a zero hours basis. During term time, Mrs Brazel worked different hours each week (depending on how many pupils needed music lessons).

Mrs Brazel was entitled to 5.6 weeks' paid holiday each leave year under her contract. She was required to take her holiday during the school holidays, when she was not giving music lessons.

Before September 2011, it was agreed between the parties that Mrs Brazel would take holiday in three equal tranches in the year. Her holiday pay was calculated by taking her average weekly pay in the 12 weeks prior to the school holiday (ignoring any weeks she did not receive pay) in accordance with relevant employment laws. This was described by the Supreme Court as the "Calendar Week Method".

From September 2011, Mrs Brazel's holiday pay was calculated as 12.07% of her earnings in the preceding term (described by the Supreme Court as the "Percentage Method"). The 12.07% calculation was used to acknowledge that out of the year (52 weeks), 5.6 weeks would not be worked due to holiday = 46.4 weeks. 5.6 weeks is 12.07% of 46.4 weeks.

Mrs Brazel claimed she was being underpaid holiday by using the 12.07% Percentage Method. An employment tribunal rejected her claims, but the Employment Appeal Tribunal allowed her appeal. The Trust appealed to the Court of Appeal who dismissed their appeal. The Trust subsequently appealed to the Supreme Court.

The Trust's argument was that a part-time worker who only works part of the year should have their holiday entitlement pro-rated to allow for the weeks in which they are not required to work. The Trust highlighted that under the Calendar Year Method, part-year workers would receive disproportionately more paid leave than other workers.

The Supreme Court dismissed the Trust's appeal. They held that (1) the holiday entitlement for a part-year worker under a permanent contract does not need to be pro-rated to be proportional to that of a full-time worker and (2) the Calendar Week Method was compliant with the relevant employment laws.

It confirms the holiday entitlement and pay for term-time only workers on a permanent contract working irregular/variable hours (those are paid by the hour or only for the time they actually work):

• Holiday entitlement must not be pro-rated based on them only working a proportion of the week or year. It remains the same as that of their salaried, employed colleagues - 5.6 weeks per year.
• These workers are entitled to a 'week's pay' during a week's holiday and this must be calculated on the worker's average weekly pay for the preceding 52 working weeks (or, if the worker has been employed for fewer than 52 weeks, the period of his or her employment up to the calculation date). Employers should disregard any whole weeks during which the worker performed no work and received no remuneration (such as school holidays). A week for these purposes runs from Sunday – Saturday.

It is likely to impact workers who are paid by the hour or only for the time they actually work (such as music teachers or other peripatetic staff, supply teachers etc).

Adam is a part-time music teacher on zero hours, term-time only contract. Whilst he only works term time, he remains in employment for the full year. Adam is entitled to be paid for 5.6 weeks holiday to be taken at some point during the school holidays. Adam is able to notify the school of when he would like to take holiday and receive holiday pay.

The school breaks up for summer holidays on Friday 22 July and Adam decides to take a two-week paid holiday in mid-August before the school returns in September. The school should therefore take an average of Adam's pay rate over the last 52 weeks in which he worked, starting with the last week at the end of the summer term and omitting any other periods of school holiday in which Adam was not paid. They should then multiply this by two to work out the holiday pay due for the 2-week paid holiday in August.