IN July, the Supreme Court delivered its judgment in the case of Harpur Trust v Brazel upholding the Court of Appeal’s decision that part-year workers should not have their paid holiday apportioned.
This decision is likely to have a significant impact on any businesses who employ term-time, zero hours or part-year workers as the case settled the dispute on what the correct method is for calculating holiday pay for employees who only work for certain parts of the year.
Previously it was argued that the statutory entitlement to annual leave should be apportioned for an employee working fewer weeks than the standard 46.4 week working year. However, the Supreme Court stated that the Working Time Regulations 1998 did not allow for apportioning of holiday pay for permanent employees.
For employers in Northern Ireland, this decision is applicable to an employee who is deemed to have no regular working hours under (s. 20 of the Employment Rights (NI) Order 1996). For these employees, employers must now change how they calculate holiday pay in order for it to comply with the decision in Harpur.
The correct formula to calculate holiday is the calendar week method, this involves calculating the average of all the remuneration earned in the previous 12 weeks by the employee. If in the last 12 weeks, no remuneration was paid on any given week, the employer must ignore these weeks and must instead take account of earlier weeks where remuneration was paid to calculate the 12-week average. This is notably different from the provision in England which uses a 52-week average calculation period which was introduced on April 6 2020.
For those staff employed permanently but have irregular or part time hours the decision could lead to them receiving a proportionally greater sum of holiday pay than a full-time member of staff. To avoid this, employers have several potential steps available to them.
Firstly, they should try and avoid situations where employees are employed on a full-time contract of employment but work a vastly greater number of hours at a peak time. Avoiding long periods where an employee undertakes no work will help reduce the possibility of absurd results as the employer must ignore periods where no work is carried out for the purposes of holiday pay calculations.
Furthermore, employers may look at those employees on an hourly rate who work varying hours depending on the seasons and decide to instead pay them an annualised salary which is the same every month. This would curb the potential for proportional unfairness and reduce the administrative burden of having to undertake weekly calculations.
Employers also have the option of changing the contract of employment, switching to a zero-hours model as opposed to a full-time contract when in fact they do not require that employee to undertake the work on a consistent basis.
With regard to limitation, the case of Harpur does not address the issue. However, the case of Chief Constable of the Police Service for Northern Ireland and the Northern Ireland Policing Board v Agnew and others does.
The court in this case failed to give a concrete limitation date for claiming holiday pay, but as a guide it encouraged the parties to agree a “pragmatic, administration-friendly method for calculating and paying “normal pay” based on averages taken over a rolling 12-month period immediately preceding the period of leave”.
Employers should therefore pro-actively identify possible instances where there has been a potential underpayment and come to a sensible compromise with the employee to rectify this.
:: Andrea McCann (andrea.mccann@mckees-law.com) is a Partner at McKees (www.mckees-law.com) specialising in employment law.
