If you employ part year employees, zero hour employees or engage casual workers, you’ll likely have read about the Harpur Trust v Brazel case; the details and the implications. This guidance note, expands on our recent article and focuses on what this decision actually means in practice for employers & what your options are moving forward.
Harpur Trust v Brazel & Categories of Workers Impacted
The Harpur Trust v Brazel decision specifically applies to;
- Those workers who only work for part of a year without their contract coming to an end. Examples of part year workers would be school teachers and term time only workers. They are specifically employed to work for a particular proportion of a year
- Zero hour employees – If you have zero hour employees that work every week of the year, albeit different hours per week, then they are not part year workers & this decision does not apply. However, any zero hour employees who have a week or weeks without working any hours, are part year workers
- Casual workers – The decision will almost certainly apply here as casual workers won’t work every week of the year and are called upon now and then to fulfil work whilst remaining engaged by the company during periods of no work.
The decision does NOT apply to;
- Part time workers who work all year round. Note the difference between part year and part time; the decision applies to the proportion of the year worked and not the amount of hours worked in a week
- Fixed term workers or workers who start / leave part way through the year. If their contract comes to an end part way through the year, you would calculate their holiday entitlement on a pro rata basis
- Those workers who take sickness, maternity, or other leave from work where they aren’t present in work for a period of time in a year
Harpur Trust v Brazel Case | An Overview
Part year workers are entitled to 5.6 weeks annual leave regardless of how much of the year they work. It has been noted and accepted by the Court that it could lead to absurd results. It has been noted and accepted that it could mean, for example, someone who only works for 2 weeks in a full year is entitled to 5.6 weeks annual leave and pay meaning they would receive more than double in holiday pay than their normal total remuneration for the year.
Many organisations were calculating holiday entitlement using the formula of total hours worked x 12.07%. Whilst this method of calculation has always sat outside the Working Time Regulations, the Harper case further emphasises why it should not be used by employers as it will not produce the correct holiday entitlement for part year workers.
What does the Hapur Trust v Brazel decision mean for holiday calculations?
Entitlement – Average hours worked per week x 5.6 = holiday entitlement (in hours)
**To calculate an “average week” we would recommend you consistently use either a 12 or 52 week reference period. The total hours worked over this reference period divided by 12 or 52 = the average working hours per week**.
Please note that in line with the information detailed below, any weeks in which remuneration is not paid should be discounted from the reference period
Pay– You would pay the worker based on their average weekly pay. This has to be calculated over a 52 week reference period. You need to disregard any weeks where no pay was received. If required you take earlier weeks, going back a maximum of 104 weeks. You do include weeks where holiday pay was given. If they haven’t accumulated 52 weeks’ worth of pay then you would calculate over their total weeks of pay. This would be done each time they take any of their annual leave meaning they will be paid different rates for different periods of annual leave if they work irregular hours.
This is more straight forward for part year workers with regular, predictable hours over the year as you would simply multiply a normal week’s pay by 5.6 to find out their yearly holiday pay entitlement. For those with irregular hours you’d first need to find out what their average weekly pay was before multiplying by 5.6 to get their yearly entitlement.
You can wait for workers to raise a claim or you can act now.
If you want to tackle it head on & make back payments to your workers then you would need to calculate what the worker should have received over a period of up to 2 years and then back pay the difference between this and what has already been paid. If there is a gap of 3 months from one underpayment to the next then this breaks the chain & limits liability to this period.
Harpur Trust v Brazel Case & Options Moving Foward
In the vast majority of cases, it is just one of those decisions organisations will have to accept and factor into their costs for employing part year workers. However, take a look at a few options below where you may be able to avoid or limit the impact of the decision.
Keep on Top of Those not Picking up Work
Particularly relevant for casual workers; if someone is just sitting stagnant on the books and only rarely picking up work then they will still accrue the 5.6 weeks’ holiday entitlement. Why not review your casual workers every so often & end engagements in writing, with those no longer required? Contact the advice line if you’re looking to bring any contracts or agreements to an end.
Fixed Term Contracts
Can fixed term contracts be offered for those who you only need for a proportion of the year? If so, this will limit their ability to accrue holiday as you can pro rata it for the period of time they’re required to work.
Make Workers take Annual Leave in Weeks
For ease of calculation, it is fine to require part year workers to take their annual leave in full week blocks. You could grant requests for single days as unpaid leave. The final complication to this though is the taking of the remaining 0.6 leave entitlement after 5 weeks has been taken. One way of doing this would be requiring them to take a week’s annual leave with only 0.6 week’s pay. Provided their contract doesn’t stipulate a minimum guaranteed amount of hours per week, this shouldn’t create any legal issues.
Use it OR Lose it
Many contracts have a “use it or lose it” clause. However, employers are still obliged to encourage staff to take the annual leave. You could send workers their entitlement at the start of the year so they’re aware of how many holidays they have (you can simply tell them they have 5.6 weeks to take), then send a half year reminder for them to request leave if they want it. If someone fails to request annual leave then you can show you’ve fulfilled your obligation and they lose it. There is no requirement to pay them in lieu at the end of the year.
End Casual Engagements at Regular Intervals
Another option is to end casual engagements at the end of each assignment or period of work & start a new period of engagement when the casual worker decides to pick up work again. This would mean that annual leave can be pro rata for each period of engagement as opposed to a full year’s entitlement. Any casual contracts we draw up for you are drafted in such a way to allow for this practice. Despite what it says in our contracts though, as per the guidance within these contracts, this does not mean it would necessarily hold up in tribunal. Therefore the option is there to utilise and rely on the wording of the casual worker contracts, however to err on the side of caution, we would recommend ending the contracts in writing at the end of each assignment as well. Depending on the frequency of use and number of workers involved, this could become burdensome from an administration point of view. You’d likely need to send a p45 each time too. Another consideration is that if the casual worker is employed by an umbrella company to carry out the work, this may not be possible as continuity may be arguably preserved by an overarching contract which is deemed to be ongoing.
One Hour per Week Contract
This one is definitely a gamble. It’s a clear tactic to try to avoid the implications of the decision so it’s an option with risk of it not being successful if challenged. You could look to put your zero hour employees on a 1 hour per week contract instead of zero hours. For any weeks they don’t work, you’d be obliged to pay them for 1 hour but would it work out cheaper to do this than pay them the inflated holiday? For example, if you had someone who only worked very minimal weeks of the year but when they did, they worked a large number of hours during those weeks, then they would be entitled to 5.6 week’s holiday pay based on this high number of hours as their average working week. By giving them 1 hours pay for those weeks they’d otherwise not work, you could then include those weeks in the calculation of holiday pay & it would bring their average hours down dramatically meaning the holiday pay would be based on a lower average working week & therefore less pay, even when you factor in paying them for an hour every week of the year. Beware though; there will be cases where doing this would work out more costly. It would only really be cost beneficial where someone works very few weeks of the year and a very high number of hours in the weeks they do work.
Continue with 12.07% & Caluculate Once a Year
One of the most difficult practical issues will be the continuous need to calculate entitlement & pay for those who work irregular hours for part of the year (unless you invest in an electronic system that does it for you). You’d have to calculate each workers entitlement and pay each time they requested holiday. If you don’t want to calculate this each and every time for every worker then you might decide it’s easier to continue to use the 12.07% approach. If so we would strongly urge you to then calculate and pay the difference at the end of the year based on a calculation of the actual work over the previous 52 weeks. You wouldn’t be able to do this if an employee objected to this practice though and we’d recommend ensuring that the employees physically take the leave from work rather than rolling up holiday pay at the end of each pay period (which is unlawful).
If you’re looking to implement one of the above options moving forward then we would recommend speaking to one of our HR Consultants first.