MHA | Holiday Entitlement and Holiday Pay – the latest!

Holiday Entitlement and Holiday Pay – the latest!

Posted on: May 24th 2023 · read

Holiday Entitlement and Holiday Pay – the latest!

Back on 20 July 2022, the long awaited Supreme Court judgment in Harpur Trust v Brazel clarified the law in relation to holiday entitlement for Part-Year workers.

The case concerned a Part-Year worker who had a continuing contract but did not work every week of the year. The decision affected employers of Part-Year workers, Zero-Hour workers, Seasonal workers, but not those of part-time workers who are contracted to work every week.

Prior to this case being brought, it had been the accepted wisdom that such employees could be paid a pro rata amount for holiday entitlement, calculated at the 12.07% rate (being 5.6 weeks divided by (52-5.6) expressed as a percentage).

The Supreme Court found, however, that anyone on a Part Year continuing contract was entitled to 5.6 weeks’ holiday, not a pro-rated entitlement, despite not working every week in a year. It also found that holiday pay needed to be calculated based on the preceding 52 weeks in which work was performed (i.e., excluding weeks in which it was not performed). This obviously had huge implications for the education sector where Term-Time-Only and other Part-Year working is commonplace.

How did this happen?

Most employers who had Part-Year workers were operating on the “but surely…” principle i.e. anyone working less than full time, whether it be hours per week, days per week or weeks per year must surely be entitled to a pro rata holiday entitlement of their full time counterparts. That, however, is not what the law says!

The Working Time Directive (the original EU legislation) contained the ‘conformity principle’ meaning that anyone working less than full time, be that hours per week or weeks per year, would have a pro-rated entitlement. When the Directive was enacted in the UK as the Working Time Regulations in 1998, this was not included. Therefore, the Regulations state that all workers are entitled to 5.6 weeks’ leave per year. The Working Time Directive does not prevent a more generous provision being made by domestic law.

Thus, the judgment in Harpur Trust v Brazel was a victory for Mrs Brazel who correctly identified this sloppy drafting of the UK legislation.

What happens now?

The current situation is that employees on these types of contract are now entitled to 5.6 weeks’ holiday per year, and there could also be an appetite for backdated claims. Employers have generally chosen either to settle potential claims or put money aside for such claims should they be made. It should be noted that there is a two-year limit on claims for backdated holiday pay (unlike the six-year limit on other deductions from wages claims); however, a “chain” of deductions will be broken if there is three months or more between them.

The Supreme Court is now considering the Chief Constable of the Northern Irish Police v Agnew in respect of whether that gap of three months or more between underpayments does in fact end a claim. If the Supreme Court judgment is in favour of the claimant, this will substantially increase the value of claims for backpay in respect of underpaid holiday pay.

At the same time, however, Mrs Brazel’s claim has resulted in the Government finally opening consultation regarding proposed new legislation whereby part-year workers’ holiday entitlement is pro-rated according to their actual weeks of work. It has only taken them 25 years! 

The proposals include calculating a part-year worker’s holiday entitlement at the beginning of the leave year by reference to what was worked in the previous leave year.

Consultation closed on 9 March 2023 and the Government is now considering the feedback. As we know, it can take some considerable time for proposed legislation to come into effect.

In the meantime, of course, the Retained EU Law (Revocation and Reform) Bill has been making its way through parliament with the aim of reviewing all EU-derived laws and deciding whether to repeal or retain them by 31 December 2023.

The Working Time Regulations are obviously one such piece of legislation, so we were waiting to see if changes might be implemented via this route instead!

Then, on 10 May 2023, the Government announced that it was abandoning the “sunset clause” in the Bill whereby almost all EU-derived law would be automatically revoked at the end of 2023, unless it was specifically retained. This means instead that EU law will in fact remain in place unless it is expressly revoked.

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