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Significant change in holiday pay for casual workers

By Victoria Brown

By Victoria Brown

Victoria discusses the recent landmark judgement on the calculation of holiday pay for casual workers.

The Supreme Court delivered a landmark judgement on the calculation of holiday pay for casual workers recently.  If you have staff with these sorts of arrangements, then I strongly advise you to read on……

It is no longer just full-time staff who are entitled to 5.6 weeks of annual leave.  As you may be aware, the working time regulations (1998) grants all workers the right to paid annual leave.  This right extends to casual workers and staff with zero- hour arrangements.  It is fairly straight forward to calculate  full time employees leave and equally the same approach applied to part time employees with fixed days/hours each week.  However, it has never been particularly clear in the correct way to calculate holiday pay for staff that do not have a pattern to their hours.   ACAS guidance was to calculate holiday entitlement for these workers as 12.07% of hours worked on the basis that this is the equivalent to statutory holiday for full time workers.  ACAS has since removed this guidance.

In the case of Harpur Trust v Brazel, the Supreme Court delivered a landmark judgement on the calculation of holiday pay;

  • The Supreme Court decided that annual leave entitlement for part-year workers must not be pro-rated.  This includes anyone who works under a zero-hours, variable-hours, term-time only, casual or agency contract.
  • The Supreme Court also outlined that the 12.07% method, which was previously used as a way to calculate accrued entitlement for part year workers, must not be used.
  • The judgment confirmed that all workers, regardless of how many weeks per year they work, are entitled to 5.6 weeks’ paid annual leave.  Pay for this leave should be calculated by taking an average of weekly earnings over the previous 52 weeks, discounting any weeks in which no wages were payable.
  • Affected staff may also request back pay to cover any previously underpaid holiday (in most instances this would be to cover a maximum of 2 years’ underpayments).

The case in question was a music tutor that provided lessons during term time and did not have fixed hours a month/week.  However, any Employer that engage staff on a casual or atypical form basis needs to review the way in which they calculate holidays and ensure they are inline with this Supreme Court ruling.

This ruling will result in these types of working arrangements receiving a more generous treatment than full time employees.  The Court acknowledged this and said it was not prohibited in law.  They also acknowledged that this judgment could result in some extreme results.  An example put forward was a school invigilator who may only work a few weeks a year but would be entitled to 5.6 weeks’ paid leave calculated on the weeks they actually work.  It seems quite ridiculous that someone could work a fraction of a year and yet receive the same entitlement as someone that works full time!

The other huge concern I have for my clients and Employers reading this is the monetary impact this may have on business.  If casual workers (or ex workers) look to bring a claim for additional holiday pay in light of this ruling.  This is going to have a significant impact on my clients in sectors such as the hospitality and leisure, which are still recovering from the devastation of the pandemic. If you are concerned about this ruling and would like some advice, then please do not hesitate to contact the team

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