Temps and Umbrella Workers Holiday Calculations May Change

An important ruling from the Supreme Court in Harpur Trust v Brazel means that the way in which holiday entitlement is calculated for temporary and umbrella workers may change.  The case concerns the method of calculating holiday for a school music teacher (Mrs Brazel) who was  engaged on a zero hours contract to work during term time.  As her employment status is ‘worker’, Mrs Brazel is entitled to 5.6 weeks paid holiday annually, the same statutory right as a permanent employment.

Mrs Brazel is a part-year worker, and Harpur Trust argued that her annual leave should be prorated to take account of the weeks not worked.  However the Supreme Court ruled against Harpur Trust, and rejected their methods of calculating Brazel’s holiday, including the recruitment industry norm of multiplying earnings by a factor of 12.07%.

Instead the court ruled that holiday should be calculated in accordance with the formula provided by the Working Time Regulations; based on an average week’s pay multiplied by 5.6 weeks.  Other recent changes to the Working Time Regulations mean that holiday should be calculated based on a 52-week working-week average.

Where does the 12.07% come from?

The logic behind the multiplier is:

  • For each holiday year, a worker is entitled to 5.6 weeks’ paid annual leave (this is the statutory minimum under the Working Time Regulations).
  • When calculating you allow for the fact that those 5.6 weeks of the year will not be worked.  52 weeks minus 5.6 weeks is 46.4 weeks.
  • 5.6 divided by 46.4 is 12.07%.

This method had previously been included in ACAS (The Advisory, Conciliation and Arbitration Service) guidance but has since been removed.

So what does the Supreme Court ruling mean in practice?

Firstly, it’s important to note that the judgement does not change the law, instead it confirms and clarifies how current legislation should be interpreted.  It has clarified that the ‘Calendar Week Method’ (and not the 12.07% method) should be used to calculate holiday entitlement, i.e. based on an average working week and not prorated to take account of non-working weeks.

Secondly the case determined that Smith’s right to holiday did not lapse, but “carried over” until the termination of his employment because his employer prevented him receiving his entitlement.  And thirdly, the case confirmed that Smith’s claim could be heard because it was submitted within three months of his employment ending.

The specifics of how you will be affected are going to depend on how your holiday is currently calculated.  You should check any Key Information Document received and the contract that you have with your umbrella or recruitment agency.  If you think the 12.07% holiday calculation has been used, you should contact your umbrella or recruitment agency to ask how this will change in the light of the Harpur Trust v Brazel case.

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