The Court of Appeal has held in The Harpur Trust v Brazel and anor that, when calculating holiday pay for a “part-year” worker on a permanent contract, employers cannot apply the pro rata principle. Instead, they have to apply section 16 of the Working Time Regulations which states that workers are entitled to be paid on the basis of their average earnings over a 12-week period prior to them going on leave.

Basic facts

Ms Brazel, a part-time music teacher, did not work a full working week. Nor did she work during the school holidays. However, she was employed under a permanent contract of employment, meaning that she was entitled under the Working Time Regulations (WTR) to 5.6 weeks annual leave.

As the school holidays were far longer than that, the Trust made three equal payments in respect of her leave at the end of April, August and December.  Those payments were made in accordance with ACAS guidance for calculating the holiday pay of casual workers, which stated that the holiday entitlement was equivalent to 12.07 per cent of hours worked over a year (5.6 weeks divided by 46.4 weeks).  The school calculated her holiday pay on the basis of 12.07 per cent of her total pay over a year paying one third of 12.07 per cent at the end of each term.

Ms Brazel argued, however, that her holiday pay should be calculated according to section 224 of the Employment Rights Act (ERA) 1996. This states that workers who do not have normal working hours should have their holiday pay calculated on the basis of their average earnings over a 12-week period prior to taking the leave. 

Relying on ACAS guidance, the Trust argued that its calculation was correct on the basis that it was pro rata to that worked by someone who worked a full year.

Mrs Brazel brought a claim for unlawful deduction of wages as well as claims under the WTR and Part-Time Workers (Prevention of Less Favourable Treatment) Regulations.  

Tribunal and EAT decisions

Agreeing with the Trust, the tribunal held that the application of the 12.07 per cent figure to either the length of the holiday entitlement of Mrs Brazel’s average pay over the course of the working year of 46.4 weeks would give her proportionately the same holiday entitlement as a full year worker.

However, the EAT (see weekly LELR 568) overturned that decision on the basis that the WTR does not stipulate a different approach for calculating the pay of a worker who does not work for a full year.  Instead section 16 simply states that workers are entitled to be paid for their annual leave, calculated on the basis set out in section 224 of the ERA.

Decision of Court of Appeal

The Court of Appeal agreed with the EAT that the regulations do not stipulate any particular mechanism for assessing holiday pay entitlement on a pro rata basis. As a “part-year worker” (someone employed permanently but who only worked for part of the year), Ms Brazel was therefore entitled to the full 5.6 weeks, irrespective of the fact that she did not work throughout the year. As such her annual leave had to be calculated on the basis of identifying a week's pay in accordance with the provisions of section 224 of the ERA and multiplying that figure by 5.6.

The Court accepted that European case law appeared to establish that the Working Time Directive requires only that workers should accrue entitlement to paid annual leave in proportion to the time that they work.  However, this leads to the result that workers who do not work a full year are not then entitled to the full holiday entitlement under Article 7 which is a surprising result.  The Court also pointed out that the accrual approach applies to assessing holiday entitlement and not to holiday pay.

Although it might seem that part-year workers would be entitled to a higher proportion of their annual earnings than is the case for full-year workers it was not unprincipled or unfair.  It is important to remember that the actual days holiday and pay would ultimately reflect their actual working pattern.

The Court considered the exercise required by regulation 16 and the incorporated provisions of the 1996 Act was straightforward, it should therefore be followed.