August 2022 – Holidays for Term-Time Only and Zero Hours Workers
Employment Update for Small Businesses
You may have seen in the news recently that the Supreme Court has handed down an important judgment relating to holiday pay for people who only work during term-time (or who have other arrangements whereby they do not work for some of the year). The judgment also relates to holiday for staff on zero hours contracts. In this month’s update we explain the judgment and the degree to which it may or may not affect you.
Please contact me if you would like to find out a bit more about any of the subjects raised in this update or if you need any help or advice.
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The Supreme Court has handed down its decision in the long-running case of Harpur Trust v Brazel, which is to do with the treatment of holiday for term-time only (TTO) workers. Its findings, which uphold the decision of the Court of Appeal, are also relevant with respect to holidays for those on zero hours contracts (ZHC).
In short, TTO and ZHC workers are entitled to 5.6 weeks holiday per year and when they take holiday, the pay they receive should reflect a normal week’s pay.
It used to be quite common to give TTO workers around 4.7 weeks holiday to reflect the fact that they worked 39 weeks in the year, compared with the 46.4 weeks worked by someone on an all year contract (as 5.6 weeks would be taken as holiday). However, since the Harpur case was first reported at the Employment Appeal Tribunal, that has been shown to be quite risky as it did not comply with the Harpur decision.
Over the last few years, taking into account this case, we have encouraged our clients to put term-time only workers on salaried pay arrangements, so that they receive their pay spread over 12 months of the year rather than being paid at the time the work is carried out. This has been in an effort to avoid the disproportionate effect of the Harpur case, which can result in TTO workers receiving more holiday than those who work all year round, on a pro rata basis. However, if you do have any TTO workers on a pay-as-you-go arrangement, please contact us if you would like some further guidance and support.
In the Harpur case, Mrs Brazel worked on a ZHC providing musical instrument tuition to pupils at Bedford Girls School during term-time only. She was paid an hourly rate and her hours varied from week to week. She was paid holiday pay at the end of each term based on 12.07% of the pay she had received during that term. At the time that was the method suggested by ACAS on their website.
However, prior to September 2011, the employer had provided her with 5.6 weeks’ pay per year, split into three equal amounts of 1.87 weeks to be taken in each main holiday period. When she took the holiday it was calculated as an average of the pay received taking into account only weeks during which she received some pay (this is the method which the Supreme Court has decided should have been used throughout). The change in her holiday pay arrangement resulted in her receiving less holiday pay, which prompted her claim.
The key issue here is that Mrs Brazel was paid for work carried out on a monthly basis, with there being periods of no pay over the holiday periods and for some weeks in term-time when she was not required. If TTO workers are put on a salaried arrangement with their annual salary being spread over 12 months, this issue will not arise, as they will receive a normal week’s pay when they take holiday (in the same way that salaried staff who work all year round receive normal pay when they take their holiday). This is because the law states that holiday pay should be calculated as a normal week’s pay. If pay varies with the amount of work done, then you need to calculate an average week’s pay using the last 52 weeks, but ignoring weeks when the worker received no pay. If you pay TTO staff on a monthly or weekly basis according to hours worked, then there will be gaps in pay over the holidays which you need to ignore when calculating the average, inflating the holiday pay in comparison with what they would have received under the salaried arrangement.
If you are considering taking on TTO staff in future, another way of potentially avoiding this issue is to take them on for shorter, fixed term contracts covering each term (or at least just for the academic year), as you are allowed to pro rata the annual holiday entitlement to take into account the period of the holiday year missed up to their start date and after their termination date.
Finally, I should point out that this decision only applies to the 5.6 weeks’ statutory holiday under the Working Time Regulations. If you give more holiday to your staff, that does potentially provide some “wriggle room” in terms of your holiday pay arrangements.
I appreciate that this is quite complex, so please do contact us if you would like further guidance.
National Minimum and Living Wage
The current National Living Wage and National Minimum Wage rates are:
£9.50 per hour for workers aged 23 and over
£9.18 per hour for workers aged 21 to 22
£6.83 per hour for workers aged 18 to 20
£4.81 per hour for workers aged 16 and 17
£4.81 per hour for apprentices under 19 and those over 19 in their first year*
*N.B. Apprentices over 19 and who have completed at least one year are entitled to the appropriate rate for their age.