Harpur Trust judgment – how could this impact you
The long-awaited Supreme Court decision in Harpur Trust v Brazel has recently been heard and passed down. The decision means that those affected may be entitled to greater holiday pay.
This clarifies the position on how holiday pay should be calculated for irregular workers on permanent contracts. This is likely to particularly impact employers in the education section who engage part-year workers. Term time only workers and those on zero-hour contracts are most likely to be affected.
What is the Harpur Trust v Brazel judgment?
The Harpur Trust runs the Bedford Girls School and used the 12.07% accrual system (otherwise known as the percentage or conformity method). This converts the statutory right to a minimum of 5.6 weeks holiday pay per year into an hours worked calculation to calculate holiday pay due. This essentially pro-rated holiday pay allowance.
The Supreme Court ruled that despite part-year workers not working all year round, they are entitled to 5.6 weeks holiday. Holiday pay cannot be reduced pro-rata to reflect the actual hours worked during the year. This judgment is final and cannot be appealed or challenged further.
The judgment applies to all employees who satisfy the following criteria:
- Are engaged on a permanent contract, but work irregular hours and only work part of the year;
- Part-time workers with no regular hours; or
- Those on non-permanent, short/fixed term zero-hour contracts.
The judgment will not affect full-time workers, part time workers with regular hours, or any workers with a fixed salary.
Rather than calculating holiday pay on the holiday accrual method mentioned above, relevant workers should have their holiday pay calculated on the calendar week method.
What is the calendar week method?
The calendar week method starts with 5.6 weeks holiday (assuming this is the employees’ entitlement). You then pay those 5.6 weeks using the average weekly pay earned over the past 52 weeks, excluding any weeks where the employee did not work. If an employee is on a zero-hours contract and/or has some weeks within the 52 that they did not work, remuneration from earlier weeks should be considered to bring the total up to 52 weeks. If the employee has not worked for 52 weeks, then an average of the weeks worked should be used.
Where employees who have different rates of pay (e.g. for two different roles performed), then this will be averaged out by the 52 week average pay calculation. Further detailed guidance can be found on the government website.
Potential further issues with the Harpur Trust judgment
There are some potential extremes with the judgment. For example, schools who have invigilators, if on permanent contracts, who may only be employed for one week of the year during exam season. Say they receive £413 a week (at £11 per hour for 37.5 hours), would still be entitled to 5.6 weeks’ holiday at the rate of normal weekly pay of £413 a week (being £2,310 of holiday pay). While the probability of this happening is slim, it illustrates the potential issue.
If zero-hour contracts are to continue to be used, then the extra holiday pay should be budgeted for. Short, fixed term contracts have additional complications and complexities, and we would recommend obtaining separate advice in these circumstances.
What should you be doing now?
We would recommend that you discuss your situation with your legal, HR and payroll advisors.
All employers will need to review their contracts of employment and holiday policies. This is to ensure that they are complying with the Working Time Directive and the recent judgment.
Academy Trusts should check their transfer agreements to see if there is any indemnity available if they have recently converted.
What is the potential impact of the claims?
A claimant can usually only claim up to a maximum of two years from the date of the most recent deduction. In certain circumstances claims can go back beyond two years and could potentially be significant.
If you are looking for more information on the Harpur Trust judgment, or have any further questions, get in touch with us on: 01903 2340494