The UK Supreme Court has unanimously dismissed the appeal in the case of Harpur Trust v Brazel which considered the holiday entitlement of those workers who are on permanent contracts but only work for part of the year (part year workers).

The claimant was a part-time music teacher who worked variable number of hours during each term. She was not required to work at all during the school holidays.  The question that arose was whether the claimant, as a part year worker, should be entitled to 5.6 week’s holiday a year, or whether her holiday should be reduced to indicate that she did not work a full year.   Her employer calculated her holiday pay at 12.07% of her hours worked in the term.  This percentage is the full-time equivalent of holiday entitlement (5.6 weeks), divided by 46.4 (52 weeks less the 5.6 weeks’ holiday).  The claimant argued that her employer should have used the method of calculating holiday pay under section 224 of the Employment Rights Act 1996 (which uses a 12 week reference period but ignores those weeks where no pay is received).  The Employment Tribunal agreed with the respondent that the holiday entitlement should be pro-rated.  However, the Employment Appeal Tribunal and the Court of Appeal held that the right to paid annual leave should not be pro-rated in this circumstance.

The Supreme Court dismissed the employer’s appeal. The employer had argued that EU case law based on the Working Time Directive establishes that the amount of leave and holiday pay should reflect the amount of time a worker actually works.  The Supreme Court held that in their view the European case law does not prevent member states implementing a more generous method of calculation. The employer proposed other options for calculating holiday entitlement for part-year workers.  However, the Supreme Court rejected these methods:  First, the proposals are contrary to the statutory requirement in the Working Time Regulations. The determination of how to calculate average pay was a policy choice made by parliament that the number of hours worked affects the amount of a week’s pay in some circumstances but not in others.  In addition, the methods proposed would require complicated calculations requiring employers to keep records of all hours worked, even if not paid at an hourly rate.

There was also concern raised that not to reduce the entitlement leads to anomalies.  For example, a person who is engaged on a permanent contract but who works only one week of the year would still be entitled to notional leave of 5.6 weeks.  However, the Supreme Court held that a slight favouring of workers with unusual requirements is not so absurd as to require wholesale revision of the current statutory scheme.

It is expected that we will see an increase in the number of claims, particularly by those working in schools who have had their holiday pay determined by the “12.07%” principle, but it could extend to anyone on permanent contracts who do not work for a full year.  While some employers may have amended their practice already, others were waiting for the Supreme Court ruling.  However, employers should now review the method of calculating holiday entitlement for these permanent part-year workers.