Ruling on annual leave rights for term-time & zero hours workers

A Supreme Court ruling means term-time, zero hours and other workers who don’t work all year round should not have their annual leave prorata’d.

Annual Leave

 

Workers who permanently work irregular, annualised, term-time or zero hours are entitled to the same minimum level of paid annual holiday leave as those who work all year round, following a landmark legal judgment by the Supreme Court today.

The case centred around workers who neither work the full number of hours worked by full-time workers nor the full number of weeks worked by part-time workers. The Supreme Court was asked to rule over whether their leave entitlement should be calculated on the same principle, proportionally, as full-time employees (which would mean that the weeks that they do not work reduce their entitlement) or whether their leave should be calculated ignoring those weeks.

It ruled that the amount of annual leave should reflect the amount of work that someone actually performs across the annual leave year and should not be pro-rata’d as some employers do. It will make no difference to those employers who calculate leave based on annualised hours.

The case, supported by UNISON, involved music teacher Lesley Brazel who argued that her employer was wrong to give her fewer days of annual leave than the legal minimum because she only worked during the school term. The situation had previously been confused because of the absence of any government guidance on holiday rights for workers who don’t work full time or part time all year round. The ruling means some workers who do irregular hours could end up better off in terms of holidays than full- or part-time workers since entitlement is based on a 12-week reference period.

UNISON says the judgment means it will no longer be possible for employers to argue staff who don’t work all year are only entitled to holiday based on the hours they work.

From now on, all workers will be due the same legal minimum of 5.6 weeks (28 days for full-time employees), even if there are months during the year when they don’t work and this should not be pro-rata’d using the 12.07% method. The Supreme Court judgment upholds a previous decision taken by the Court of Appeal in 2019.

UNISON general secretary Christina McAnea said: “This important decision means that anyone, no matter when or how they work, will now be due the same legal minimum of annual holiday.

“Teaching assistants or other education employees might only be contracted to work when schools are open, but they’re also sometimes required to do their jobs at other times.

“Today’s decision clarifies the law and says that annual leave taken by someone who works less than a full year can no longer be pro-rated to that of a colleague employed all year round.

“The government’s failure to provide guidance in this area has left workers in limbo with unscrupulous employers all too keen to take advantage. Once again this shows unions as a force for good and yet another example of how they strive to improve the lives of working people everywhere.”

Impact for employers

Kate Palmer from HR experts Peninsula said the ruling will have most impact on the education sector, but could also  impact any business with zero-hours or variable-hours workers and agency staff who work part-year.

She said many employers calculate holiday for these staff using the “12.07% Method” to pro-rata their entitlement based on hours worked, but the Supreme Court ruling makes this unlawful.

She stated: “All workers are entitled to 5.6 weeks’ annual leave, regardless of how many weeks per year they work – in extreme cases, this could mean someone who works two weeks per year on a permanent contract gets 5.6 weeks paid leave. That’s more holiday than time worked!

“The pay for the 5.6 weeks’ annual leave should be calculated by taking an average of their weekly earnings over the previous 52 working weeks. If this sounds complicated, it is. These are the steps employers should be taking now, following on from this ruling:

  • Review and update their contracts
  • Review and update their annual leave policies
  • Change leave entitlement
  • Change how they calculate holiday pay
  • Backpay holidays which haven’t been given at the right rate
  • Make sure staff get extra holiday to make up their 5.6-week total entitlement
  • Communicate the changes with staff
  • Deal with pressure from trade unions
  • Still juggle their normal day-day workloads

Dave Chaplin, CEO of tax compliance firm IR35 Shield, welcomed clarification, but said the ruling left some important questions. He stated: “For temporary workers on zero hours contracts, agency payroll, or via umbrella companies, it begs the question: where is this money going to come from?

“Could an agency worker, who has just completed a three-month stint, and traditionally built up around 1.5 weeks holiday pay, now have an extra four weeks paid to them, simply by stopping work? Was that really the underlying intention of the Working Time Regulations?

“Umbrella companies and agencies are now going to need to adjust how they operate, to ensure they can correctly operate within the law.”



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