It will be significant not only for independent schools, but also for the wider education sector and indeed for any employer of term time only, or part-year staff.
Given the case's high profile, we anticipate it will be reported in the legal press and the mainstream media. Your staff may question the impact of the judgment on them personally. To maintain the initiative and to be decisive, our recommendation is for schools to plan their strategic response to the Supreme Court judgment.
Mrs B is a visiting music teacher employed under a zero hours term time only contract. She works variable hours according to fluctuating demand for music lessons.
Mrs B’s holiday pay is calculated with reference to the sector-standard 12.07% formula, which until recently had been promoted by ACAS, endorsed by the Government and widely accepted as the correct way to calculate term time only staff holiday entitlement.
The 12.07% figure represents the statutory holiday to which year round staff are entitled: 5.6 weeks statutory annual leave equates to 12.07% working time (the pro rating principle).
Mrs B’s claim is that the 12.07% formula bears no reference to the Working Time Regulations (Regulations), which for her category of worker simply require holiday pay to be calculated based on average weekly pay.
Calculating holiday entitlement in this way means that holiday pay for term time only staff will not be reduced to reflect part year working. Put another way, according to this argument, a part-year worker could work (say) three months of the year and still be entitled to a full 5.6 weeks’ annual leave and pay, ie the same holiday as a colleague working the whole year.
The Trust and the pro rating principle succeeded at the Employment Tribunal. The subsequent decision of the Court of Appeal is under consideration at the Supreme Court.
The Supreme Court is considering whether the pro rating principle can survive the drafting of the Regulations, or whether a strict interpretation must be used to allow someone who only works part of the year, to receive the same holiday leave and pay entitlement as someone who must work the whole year round to achieve that same entitlement.
As a point of principle and logic, many would argue that if the Supreme Court upholds the Court of Appeal decision, this would result in an inequitable system where term time only and part-year workers would receive preferential treatment in comparison to those staff who work all year round. The case may ultimately prompt a legislative change in order to address the drafting of the Regulations. However any such change, if it does come, will not happen overnight and schools need to be aware of the potential impact in the interim.
If common sense prevails at the Supreme Court and the pro rating principle is approved, no changes will be necessary to term time only staff holiday pay calculations. However, if the pro rating principle is rejected, term time only staff and part-year workers may seek back pay to cover historic underpaid holiday. Schools will also have to consider their approach to holiday pay calculations going forward. There are some key steps schools can take in order to prepare for this eventuality.
There will inevitably be a financial cost to schools if the Supreme Court finds against the pro rating principle. However, the potential impact of the judgment extends further. By adopting a proactive approach in readiness for the publication of the judgment, schools have an opportunity to control the narrative presented to staff around the impact of the decision on their school's position. This will place schools in the best possible position to maintain positive staff relations, protect their reputation as fair employers, and plan adequately for the future to manage any cost increase.
For further information on staff holiday entitlement, please contact Simon Bevan in our Schools team on 07980 828 004 or complete the form below.