Not quite, said the Court of Appeal in a judgment published on 6 August 2019. In Harper Trust v Brazel the Court confirmed that "part-year" workers (someone permanently engaged but who doesn't work a full year) can be paid proportionately more holiday pay than "full-year" workers (someone permanently engaged and who works a full year). Employers cannot cap "part-year" workers' holiday pay at a fixed percentage of annual earnings to achieve equality with "full-year" workers.
Ms Brazel, a music teacher, worked between 32 and 35 weeks per year. She was a permanent employee but her hours varied depending on the number of pupils requiring tuition.
Employees in the UK are entitled to 5.6 weeks' (28 days) holiday a year and Ms Brazel's contract provided for the same. The Trust's holiday pay calculation capped what Ms Brazel could be paid as holiday pay at 12.07% of her annual earnings. The issue in this case was whether this meant Ms Brazel had been underpaid.
Calculating Holiday Pay
Calculating the holiday pay due to "full-year" workers with normal working hours is simple. 5.6 weeks represents 12.07% of the working days in a year. Therefore, the amount paid to a "full-year" employee with normal working hours is equal to 12.07% of their annual salary.
The calculation for "part-year" workers without normal working hours, like Ms Brazel, is trickier. Employers need to calculate an average week's pay over a 12 week period. This average would then be multiplied by 5.6 weeks. Where someone works for part of a year, this calculation means that the total holiday pay can represent more than 12.07% of annual earnings. In Ms Brazel's case, her total holiday pay would represent 17.5% of her annual earnings.
This was an unjust outcome in the Trust's view and they argued that "part-year" workers should not receive proportionately more holiday pay than "full-year" workers. Therefore, the Trust used a calculation which capped Ms Brazel's total holiday pay at 12.07% of her annual earnings. Ms Brazel said that this calculation contradicted the relevant legislation and meant she had suffered unlawful deductions from her wages.
Judgment and Anomalies
The Court agreed with Ms Brazel. The Working Time Regulations set out an explicit method of calculating holiday pay. The Court acknowledged the possibility for this to create some anomalies. An example being a permanent employee, working for one week of the year for which they earned £1,000. They would be entitled to 5.6 weeks of annual leave and therefore £5,600 holiday pay. Nevertheless, the Regulations don’t refer to any pro rating. The Court decided that allowing the Trust's holiday pay calculation would amount to an impermissible substitution by the Court of an entirely different scheme to what had been provided by Parliament in the Regulations.
Holiday pay is a complex area and the statutory calculations can be easily misapplied. Especially by employers who engage staff on atypical contracts where hours fluctuate. Some of the difficulties associated with the 12 week average calculation should disappear from 6 April 2020 when new legislation will replace this with a yearly average. The Court's confirmation is nevertheless a welcome clarification for employers in the meantime. This area remains one to watch as the Government continues to consult on employment reforms further to the Taylor Review of modern working practices and the Good Work Plan.