Latest Judgement means that part-year workers could be entitled to back pay

In yet another high-profile employment case, a visiting music teacher has successfully won her case to correct her holiday pay entitlement, after deductions were made from her salary due to a pro-rated holiday entitlement.

Irregular hours and different calculation methods

The teacher in question instigated a claim that she was entitled to the full 5.6 weeks paid holiday per year as demanded by the Working Time Regulations (WTR).

However, due to school holiday length exceeding the amount of paid holiday entitlement, and a change to the method of calculating holiday pay, the teacher found that her pay was being reduced. 

Having already won the case in 2019, the educational trust in question brought about an appeal. The appeal was lost, with the Supreme Court Justice finding the new method of calculating annual leave pay unlawful.

Part-year worker model

Previous guidance from The Advisory, Conciliation and Arbitration Service (ACAS) have recently removed recommendations to apply a 12.07% calculation method for workers whose working hours vary throughout the year, but who have a continuing contract during that time. 

The practice of multiplying earnings by a factor of 12.07% is designed to address how annual leave relates to a working year.

Workers are entitled to 5.6 weeks holiday per year, and this is 12.07% of the year (5.6 weeks is 12.7% of 52). 

But this calculation often leaves workers out of pocket and is now incorrect practice for workers who are working less weeks per year, often including those in the education sector.

When the amount of time that a worker is not able to work is predictable, it is straightforward for employers to make the right calculations.

But it can be particularly difficult for employers of people who have unpredictable periods of not working, such as in this most recent case of a visiting music teacher whose hours varied according to demand.

Huge implications?

The ruling could have huge implications on holiday pay. It stated, “the amount of leave to which a part-year worker under a permanent contract is entitled is therefore not required to be, and under domestic law should not be, pro-rated to be proportional to that of a full-time worker.”

Pro-rating holiday pay has until now been standard practice to account for part time workers, but this new ruling has made it potentially unlawful. This might mean that contractors feel able to claim backdated holiday pay which had been previously prorated.

This is as yet only a ruling though and not legislation, so no contractor has the automatic right to backdated holiday pay in these circumstances. But it is certainly something that should be considered by all employers.

Dave Chaplin CEO of tax compliance firm IR35 Shield points out that the ruling could prove costly for umbrella firms, “This is a curious anomaly in the law, whereby a worker who has not earnt the full entitlement to 5.6 weeks holiday pay could still have it owed to them, simply by working full-time for 12 weeks. For temporary workers on zero-hours contracts, agency payroll or [working] via umbrella companies, it begs the question: where is this money going to come from?”

We at JMK will monitor any changes in the law and adapt our policies accordingly, as part of our continued commitment to total compliance. If you have any questions at all, please don’t hesitate to get in touch.


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