Last week, the NHF published its final version of its new Code of Governance and made some important changes from the previous draft that will impact on those housing associations looking to adopt it.
Another case that might challenge holiday-pay practice for variable hours staff has been decided by the EAT.
In the case of Brazel v the Harpur Trust, the EAT concluded that a Music Teacher engaged on a term-time-only contract was still entitled to the same statutory holiday pay as someone who works for 46.4 weeks per year. The EAT concluded that it wasn’t appropriate for her holiday pay to be pro-rated by the employer using the 12.07% approach set out in ACAS guidelines.
The EAT concluded she was entitled to 5.6 weeks holiday calculated in accordance with the provisions of the Employment Rights Act (based on her average week’s pay in the preceding 12 weeks in which she had worked), effectively 17.5% of her annual earnings. We understand there is going to be an appeal.
The decision did not expressly consider the accrual of holiday for variable hours staff nor the approach to the accrual of leave under the Regulations for variable hours staff. The claimant’s contract gave her the right to 5.6 weeks’ holiday, and we are aware that many providers apply the 12.07% principle in terms of accrual.
Who will this decision impact?
We consider the decision will affect everyone who works less than full time, in a flexible way, where their holiday pay (as opposed to the amount of leave they accrue) is capped at 12.07% of their earnings.
With fixed, part-time hours each week, their 5.6 weeks leave entitlement would equate to their standard working week, so the current approach wouldn’t change.
The impact of the decision could be significant for zero- hours workers depending on how holiday pay has been calculated under their contract to date.
Take the following example of how the case could apply in practice for a zero-hours with a standard holiday leave entitlement of 5.6 weeks. The zero-hours worker works full time for 12 weeks in a year. They would still be entitled to 5.6 weeks holiday paid at the amount of the average pay in the 12-week period.
Why have the EAT got to this conclusion?
In short, there is nothing within the Working Time Regulations that requires holiday pay to be pro-rated.
His Honour Judge Martyn Barklem, stated “I am unable to distil…any support for the proposition accepted by the ET that there is a requirement to carry out an exercise in pro-rating in the case of part-time employees, so as to ensure that full-time employees are not treated less favourably, or to avoid a “windfall” for term-time only workers.”
What isn’t clear from the judgement is whether the judge was also referencing the approach of pro-rating to the accrual of holiday entitlement.
We believe the case can be argued solely to apply to the calculation of holiday pay. The approach to the accrual for staff with variable hours has always been difficult given that holiday entitlement under the Working Time Regulations is expressed in terms of 5.6 weeks of leave and the EAT didn’t explore this issue.
As a result, we have the view that the case is not authority that an employer cannot cap the accrual of holiday at 12.07% of hours worked (a practice that is common for zero-hours staff). Sadly, the EAT did not expressly distinguish between the approach to the accrual of holiday leave (which we would argue should be pro-rated and should be capped) and to the calculation of holiday pay, which we accept should be based on average earnings in the previous 12 weeks worked.
So what should you do?
You will need to check how you have been calculating holiday leave and pay for any zero hours, term-time only or other staff with flexible hours, to check the extent of your potential exposure in light of this decision. This will help you decide whether you consider it is reasonable to change the approach to the calculation of holiday pay for anyone who is not full time and who does not have fixed hours. We would suggest taking legal advice specific to your situation if you have not been calculating holiday pay based on the previous 12 weeks income at the point leave is taken.
For more information on the issues raised in this article, please contact Matthew Wort.
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