Is Your University Truly Compliant with Pro-Rating Holiday Entitlement?

In the recent case of Harpur Trust v Brazel, Mrs Brazel is employed as a music teacher on a permanent contract. She works term time only and her hours of work are dictated by pupil demand, and so her hours and pay vary from one month to the next.

Mrs Brazel wasn't required to work during school holidays and she was paid in respect of her holiday pay three times a year at the start of each of the main holiday periods. The employer calculated this based on hours worked by Mrs Brazel in the preceding term and using the multiplier of 12.07%. This will be a familiar method of calculating holiday pay for many universities.

All workers in the UK are entitled, under the Working Time Regulations 1998, to 5.6 weeks' paid leave in each year. So the rationale was that 12.07% equates to 5.6 weeks holiday/46.4 working weeks (so pro-rating from a full time 52 weeks per year contract).

The argument before the courts in this case was whether the use of 12.07% met the requirements of UK legislation as set out within the Working Time Regulations.

The Working Time Regulations state that all workers are entitled to 5.6 weeks' leave each year. Although the European Directive from which the UK rights were implemented would allow some form of pro-rating (as has been established in European case law), that had not been expressly adopted in the Working Time Regulations.

Accordingly, the argument put forward by Mrs Brazel was that she should be entitled to 5.6 weeks' leave a year even though she only worked during term time.

Mrs Brazel also argued that because she had no normal working hours, the amount she should be paid for her holiday should be calculated by averaging her pay over the 12 weeks worked immediately prior to the relevant holiday being taken (discounting any weeks where there was no pay at all), rather than using the 12.07% multiplier.

The Court of Appeal's Decision

The Court of Appeal agreed with Mrs Brazel that technically she was entitled to 5.6 weeks' holiday per year and that it should be calculated on the basis of the preceding 12 weeks actually worked. This means that someone who is employed under a permanent contract but only works for part of the year should receive the same holiday entitlement as an individual who works all year round.

The effect of the decision is that part year workers receive a proportionately higher rate of pay for their holiday than full year workers. However, this case has made it clear that although this seems unfair, there is no equivalent protection for full time workers as there is for part time workers who might be able to bring a claim for less favourable treatment.

This judgment potentially affects:

• any worker who has a permanent employment contract and is employed throughout the year but only actually works for part of the year (such as term time workers)
• any worker who works irregular hours, whose holiday pay entitlement has been calculated using the 12.07% (or similar) multiplier

It is worth noting that, in accordance with current UK legislation, any claims brought after 8 July 2015 will be limited to two years' arrears for each member of staff from the date of claim (although this backstop may in itself be challenged as unlawful).

Should Universities Change Their Practices Now?

This will ultimately be a decision for individual universities, but the Court of Appeal's decision is binding law and there is a risk that, if practices that are not in line with it are not changed, this will give rise to unlawful deduction claims including claims for arrears. The passage of time after new practices are adopted will mean that workers will become time-barred from raising claims if they do not do so promptly. Universities will have to balance this with the prospect that the decision may be subject to further appeal. The two year cap (if upheld) also means that the value of such claims is not continuing to accrue and so the liability remains at a static level, and is not necessarily reduced by acting more quickly.

If the Harpur Trust is granted leave to appeal to the Supreme Court and is successful, it is possible that the pro-rata principle could be re-instated in terms of how the entitlement to holiday and holiday pay under the Working Time Regulations is interpreted. However, it may be some time before this is determined.

What If My University Offers Enhanced Contractual Holiday Entitlement?

There is nothing to stop universities pro-rating contractual holiday entitlement based on the proportion of the year worked, subject to everyone getting a minimum of 5.6 weeks' leave.

Steps Your University Could Take Now

• Assess which members of staff are potentially caught by this decision
• Consider whether contractual arrangements could be changed for any new (and potentially existing staff) if appropriate (ie through the use of self-employed or fixed term temporary contracts)
• Consider changing the way in which holiday entitlement has been calculated for all affected staff. They will need to have 5.6 weeks leave rather than pro-rating it and where staff work irregular hours it is likely to involve paying holiday based on the preceding 12 weeks' average pay rather than at a flat rate of 12.07%
• Quantify the risk of arrears of claims and determine a strategy in relation to these. Any such claims will be brought as unlawful deduction from wages claims and need to be brought within three months of the last deduction. Therefore, changing pay arrangements in line with the Court of Appeal decision would crystallise the time frame for bringing claims

Do you have questions regarding your university's holiday pay arrangements? Please contact Jane Byford in our Higher Education team on 0121 227 3712, or complete the form below.