Are you underpaying term time workers?

Prior to the decision in March 2018, the common practice amongst a number of employers, including some schools, was to calculate holiday pay on a pro rata basis to the proportion of the year worked.

In March 2018, the case of Brazel v The Harpur Trust brought this common practice into question. The Claimant was a music teacher in permanent employment but working term-time only, on irregular hours per week.

The school calculated her holiday pay by applying the pro-rata calculation and applied the rate of 12.07% to the amount of hours she worked in a term. In this case, the school contended that the 12-week approach gives proportionately more holiday pay than a worker who works throughout the year and therefore, this unfairly rewards part-time workers.

The EAT did not agree with this approach and held the school was wrong to cap her holiday pay at 12.07% of her annual earnings. Any anomalies which are borne out of the holiday pay calculation did not justify the statutory entitlement to holiday pay being capped at a percentage of the ‘part-year worker’s’ annual earnings. The EAT held that her holiday pay should be calculated based on a 12-week average of hours worked.

The Trust appealed this decision and the case reached the Court of Appeal. The Court of Appeal has declined to overturn the EAT’s decision, maintaining that an employer cannot cap an employee’s entitlement to holiday pay by calculating on a pro rata basis at 12.07% of annual pay.

Holiday pay for ‘part-year workers’ should be calculated based on a 12-week average of the hours worked.

Conclusion

The decision of the Court of Appeal in Brazel v The Harpur Trust outlines the position of the courts regarding the calculation of holiday pay for term-time and seasonal workers. It demonstrates that adopting the approach of simply paying 12.07% annualised hours as holiday may leave employers vulnerable to claims for unlawful deductions from wages.

If you have been working on this basis, you should now assess whether there has been an underpayment and change your approach for future holiday payments.

If you have any questions on the above and how it will affect you, please do not hesitate to get in touch.