For schools, multi-academy trusts, and recruitment agencies supplying the education sector, managing term-time and variable hours staff is a daily reality. Yet, within the routine of payroll lies a significant compliance trap that many are still falling into: the calculation of holiday pay.
A landmark Supreme Court ruling has reshaped the landscape, rendering a once-common calculation method unlawful and exposing organisations to the risk of costly back-pay claims. As we move through 2025, the grace period for non-compliance is effectively over, and HMRC is taking notice.
At JMK Group UK, where we have specialised in complex payroll for temporary and variable-hours staff since 2002, we’ve seen firsthand the confusion this has caused. This article clarifies the current rules and explains how to ensure your organisation is fully compliant.
The End of the 12.07% Method for Part-Year Workers
For years, it was standard practice to calculate holiday pay for casual and term-time staff by taking 12.07% of their earnings. This percentage was based on the statutory 5.6 weeks of holiday, compared to the 46.4 working weeks in a standard year.
However, the 2022 Supreme Court case of The Harpur Trust v Brazel decisively ruled this method unlawful for workers who are employed for a full year but only work for part of it, a category that includes most term-time staff.
The court determined that all workers are entitled to 5.6 weeks of paid holiday per year, and pro-rating this entitlement based on the hours worked is incorrect. Using the 12.07% method results in these workers receiving less holiday pay than they are legally due.
The Risk: Continuing to use this outdated calculation means you are underpaying your staff. This could lead to expensive employment tribunal claims for back pay, damaged staff relations, and significant financial penalties from HMRC.
The Correct Method: The Calendar Week Average
So, how should holiday pay be calculated now?
The correct approach is the “calendar week average” method. Employers must look back over the previous 52 weeks that a staff member has worked and earned pay (ignoring any weeks with zero pay) to calculate their average weekly pay.
A week’s holiday pay is equal to this 52 week average. Since statutory entitlement is 5.6 weeks, the total holiday pay is calculated as:
(52-Week Average Weekly Pay) x 5.6 = Total Holiday Pay Entitlement
This calculation must be performed each time a staff member takes a holiday, ensuring their pay accurately reflects their recent earning patterns. For staff with fluctuating hours and pay rates, this is a complex and time-consuming administrative task, prone to error if managed manually or with outdated software.
How JMK Group UK Ensures Your Compliance
Navigating these complex calculations is a significant burden for busy schools and recruitment agencies. The risk of error is high, and the consequences are severe. This is where outsourcing to a payroll specialist provides both peace of mind and a guarantee of compliance.
- Expert Umbrella PAYE for Temporary Staff: For education recruitment agencies supplying temporary staff, our Umbrella Company Payroll Service is the definitive solution. When a supply teacher or temporary worker joins JMK Group UK, they become our employee. We take on the full legal and administrative responsibility for their payroll, including:
- Compliant Holiday Pay Calculations: Our advanced payroll systems are built to handle the calendar week average method accurately for every worker on every assignment. We manage the accrual and payment of holiday pay, ensuring it is always compliant with the latest legislation.
- Full Employment Rights: Beyond holiday pay, we provide workers with all statutory rights, including sick pay and pension auto enrolment, reducing the administrative burden and compliance risk for both the agency and the end school.
Outsourced Payroll for Direct Staff: For schools and multi academy trusts managing their own term-time staff, our Outsourced Payroll Services offer a lifeline. We can take over the entire payroll function, applying the correct 52 week averaging method for all your variable hours and term-time employees. This removes the risk of manual error and frees up your internal resources to focus on education, not complex payroll legislation.
Don't Wait for a Claim to Arrive
The law on holiday pay is now settled. If your organisation is still using the 12.07% calculation for term-time staff, you are operating non-compliantly and are exposed to significant financial risk.
Partnering with JMK Group UK removes this risk entirely. We provide the expertise, systems, and support to ensure every member of your team is paid correctly, fairly, and in full compliance with UK law.
Are you confident your holiday pay calculations are correct? Contact JMK Group UK today for a no-obligation review of your payroll processes and let us help you achieve guaranteed compliance.
HOW JMK CAN HELP YOU
- Reduced overheads
- Improved efficiency
- Reduced risks
- Increased profits
- Significant savings
- Improved finance facilities
Since 2002, JMK have been compliantly consolidating back-office, accountancy and payroll functions.
We have evolved to provide a range of expert services; such as Funding, becoming a leading provider to the contracting industry.
We know every agency is different in some shape or form, even if only by a little, but important bit. Combining our knowledge and experience of multiple sectors enables JMK to support you all from recruiters and payroll, through to finance, compliance and management.
With JMK as your trusted partner, even the smallest team can process the largest payroll, regardless of payroll type.
Have a look at the wide range of services our Funding can provide to you and your business, it is far more than just payroll and finance.