The Supreme Court recently confirmed that holiday pay under the Working Time Regulations 1998 should not be pro-rated for part-year or term-time workers. Part-year workers should still receive 5.6 weeks annual leave.
Ms Brazel was a part-time music teacher for a school and her zero hours contract stated that would receive 5.6 weeks leave per annum, calculated based on 12.07% of her hour worked each term. The Supreme Court held that this was incorrect.
After a discussion on alternative methods of calculating annual leave, the Supreme Court decided the following:
- Part-year workers should receive 5.6 weeks annual leave;
- Payment for those weeks should be calculated based on the average of the previous 52 weeks worked, discounting any non-working weeks;
- The 5.6 weeks annual leave can only be pro-rated during the first or last year of employment.
Who is this likely to affect?
- Any business who uses term-time only or part-year workers.
They should now ensure that term-time-only permanent staff receive 5.6 weeks leave per year and that each weeks is calculated based on their average pay of weeks worked regardless of them working part-year or term-time contracts.
How is this likely to effect them?
It’s long been accepted that part-year workers are entitled to either the pro-rated equivalent of 5.6 weeks annual leave OR holiday pay paid based on their average weekly earnings over the full year (including non-working weeks). This is incorrect.
Paying part-year workers based on either of these points will result in any underpayment of holiday pay. Employees can pursue a claim for unlawful deduction of wages (underpayment) whilst in employment.
Most importantly, the chain of on-going deductions from holiday pay will continue and increase the value of any potential claim until rectified.
What should employers do now?
- Check contracts of all staff to ensure everyone is contracted to 5.6 weeks annual leave
- Ensure that any holiday pay is paid based on the average weekly pay of weeks actually worked.
- Whist checking annual leave payments, employers should check that annual leave payments include: overtime; commission; incentive or performance bonuses; shift and on-call premiums.
- Issue variation to contracts for any staff who need them.
- Start paying the correct rate of holiday pay.
- Budget for and think about use of part-year employees and the additional cost to business compared to full year employees.
Any nursery businesses should also read our HR headaches in nurseries blog here.
Frequently Asked Questions
What if my part-year (term-time only) works 3 days a week not 5 days?
This person is still entitled to 5.6 weeks annual leave per annum. The weekly pay should be based on her 3 day week but now needs to be averaged over the previous 52 weeks discounting non-working weeks.
What if I spread my term-time only pay over 12 months?
Many schools or nurseries pay their term-time only staff in 12 equal monthly instalments. Although this can sometimes create issues for National Minimum wage purposes, presuming in this instance that it does not, employers still need to be careful calculating holiday pay.
In this case, the holiday pay needs to be calculated based on the pay due (regardless of the arrangement to split it over 12 months). The pay that was due to be paid during the previous 52 weeks discounting non-working weeks is the average weekly pay.
Can I still require my term-time only staff to take their annual leave during school holidays?
Yes however once you’ve checked or recalculated the holiday pay, you may need to increase the amount you pay to them. Many term-time only staff have holiday pay added on to their annual salary as the weeks taken as annual leave are pre-assigned. This is technically ‘rolled up’ holiday pay but so long as it is detailed on the payslip and defined in the contract and has been discussed with the employee, there is not much legal redress open to employees.
We predict this may change. The new ruling means that part-year employees receive a higher rate of holiday pay than full-year staff.
A term-time only employee now receives 5.6 weeks paid leave at the average pay based on 38 weeks worked; whereas a full-year employee has to work 46.4 weeks in the year to receive the same amount of holiday pay. There is no legislation preventing full time workers from being disadvantaged in this way and the Supreme Court’s ruling is a strict application of the law but we think eventually (who know when) provision will be made to put both entitlements on an equal footing.
Let us help cure your HR Headaches
Speak to Employment Law Solutions if you have any queries about your annual leave, current contract, or if you wish to make changes to your current contracts. A dedicated lawyer would love to review your current documentation for you, free of charge.
Employment Law Solutions have a solid base of Nurseries and early years settings within our client base and are in touch with the issues and HR headaches that you may be facing. We can help. Call us today or get in contact by email for a free consultation on the issues you may be facing in your early year’s settings.
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