Over the last few years, there has been a significant amount of upheaval regarding the calculation of holiday pay. The most significant change has been that the calculation is now based on the previous 52 weeks of pay, rather than 12.07% of salary as it was previously.
But with all the changes, problems have arisen, showing inconsistencies in the treatment of full-time, part-time and term-time only colleagues. This has highlighted that the calculation method may not be fair for everyone.
Harper Trust v Brazel
One example of this is in the case of Harper Trust v Brazel. This case has spent a couple of years working its way through the Courts system and finally made it to Supreme Court for a final decision on the matter.
The case was brought forward because Mrs Brazel considered that she was disadvantaged when holiday pay was considered because she only worked term time, despite having a permanent contract.
Under the old basis of calculation, Mrs Brazel’s holiday pay was calculated at 12.07% of her pay. However, Mrs Brazel argued that her employer should multiply her average weeks’ pay by 5.6 (a worker’s standard holiday entitlement) to arrive at her holiday pay. Using the 12.07% method, Mrs Brazel argued that this produced a lower holiday pay figure. The case travelled through the UK Court system before finally arriving at the Supreme Court.
The outcome of the case
The Supreme Court agreed with the Upper Tier Tribunal and Mrs Brazel. It stated that part-time workers on a permanent contract should have the same basis of calculation of holiday pay as full-time employees.
The Supreme Court considered the requirement of the Working Time Regulations 1998 and deemed that all employees should be treated the same way.
The outcome of this case is extremely unlikely to affect employees who work full time. Part-time employees who work on a regular basis should similarly be unaffected; however, employers should take heed and carefully review workers on permanent contracts who work term time only.
Supporting our clients
As always, at Dataplan, we aim to support our clients in navigating all current and new legislation impacting their payroll and pensions. Our experts work with our clients to navigate their holiday pay calculations on a case-by-case basis.
If you are an existing Dataplan client and have questions regarding holiday pay calculations, you can query these with your account manager. Alternatively, if you are not currently a Dataplan client and want to know more about how our experts can keep your payroll compliant, then please get in touch.
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