All ‘part-year’ workers and employees will now receive a minimum annual leave entitlement of 5.6 weeks, following a landmark legal judgment by the Supreme Court in the case Harpur Trust v Brazel. Before this court case , holiday pay for workers and employees that worked less than full-time was calculated pro-rata, but this will no longer be permitted.
It is a significant legal development that impacts a wide variety of workers and employees on permanent contracts with irregular hours. These include term-time only workers or employees, seasonal worker or employees, those on zero-hour contracts and bank staff.
For employers, the legal judgment means they must reconsider some of their existing holiday calculations, ensuring workers and employees are not treated less favourably than their full-time counterparts. To help bring clarity to the situation, we have addressed some of the most asked questions following the recent development.
Is part-year and part-time the same thing?
One of the most common misconceptions is that a part-year and part-time worker or employee are the same thing. A part-year worker or employee is any individual engaged on a permanent contract, that is only required to work at certain periods during the year. A part-time worker or employee is someone who may be engaged on a fixed-term or permanent contract but works fewer hours than those that are full-time.
Part-year workers or employees are very common within the education sector, as ‘term-time’ contracts are used to secure staff during the school terms and not the holidays.
Which workers or employees/sectors are covered?
Those covered by the judgment are workers or employees engaged on permanent ‘year-round’ contracts, who are only required to work part of the year. This includes workers or employees engaged on permanent zero-hour contracts, permanent seasonal workers or employees and term-time only workers or employees. For this reason, the development will likely impact employers across a wide range of sectors, including education, healthcare and manufacturing.
What does the judgment say?
Employees and workers that meet the criteria detailed above, must now receive the full statutory minimum of 5.6 weeks (28 days) paid holiday entitlement per year. This is not to be reduced on a pro-rata basis if they work part of each year of employment.
The holiday pay must be calculated using the ‘Calendar Week Method’ of averaging a week’s pay. This means an individual’s pay over the previous 52-week period must be averaged to calculate the entitlement, but only including the weeks actually worked. However, the legal judgment does not prevent employers from deciding when holiday is or is not taken.
What must employers consider?
Employers must review their existing holiday entitlement calculations to ensure there are no issues with annual underpayment created under the previous method of calculation. Any underpayments in holiday pay are likely to be brought as claims for unauthorised deductions from wages, which must be brought within 3 months of either the date of the alleged unlawful deduction or, if there has been a “series of deductions”, within 3 months of the date of the final deduction. If there is a gap of more than 3 months between two deductions, then this would “break the series” and an individual’s ability to recover sums owed would be limited to the deductions that fall within the 3-month prescribed time limit.
From a long-term perspective, employers must now consider whether the use of part-year contracts is sustainable or whether it makes sense to hire staff on a full or part-time basis.
Can this entitlement be capped at 5.6 weeks for part-year workers or employees?
As long as full-time members of staff only receive 5.6 weeks paid holiday, then yes, the entitlement can be capped. However, if full-time workers or employees are offered additional holiday, then employers must ensure the same is given to part-year workers or employees, although it is possible to pro-rata any leave in excess of the 5.6 weeks to reflect the number of weeks worked.
However, capping holiday entitlement is not without its risks so it is best to seek expert legal guidance before taking such action
Is there any alternative?
The impact of this legal judgment is far reaching and employers will have to tread carefully to ensure they do not breach the regulations. However, one potential alternative is to engage part-year staff on individual temporary contracts which only cover the time they are working.
If this is a course of action you are considering, then it is important that the contracts genuinely reflect the employment relationship between the business and workers. Again, to ensure this is the case, please get in touch with one of our employment lawyers.