What does the Harpur Trust vs Brazel case mean for charities calculating holiday pay?

In the summer of 2022 the Supreme Court ruled on a case that had wide ranging impacts, particularly on charities that employed part-time, part-year or zero-hours workers.

The case

For many years, a holiday pay calculation known informally as the ‘12.07% method’ had been used to calculate holiday pay for these workers. The case involved a teacher on a zero-hours contract working informally across the year. The employer would calculate earnings at the end of each term, take 12.07% of that figure and pay the applicable hourly rate for that number of hours as holiday pay.

However, the case centred on the impact of the working time regulations and if this method was actually lawful. Counsel for the employee argued that instead of the above method – employees on these contracts should have holiday pay calculated by taking an average of earnings over the previous 12 weeks (from 6 April 2020 this reference period was increased to 52 weeks), which would have resulted in a higher amount of holiday pay. The court sided with this higher rate and deemed the 12.07% method inapplicable.

What does the The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 Bill outline?

In summary, the new Bill introduces changes to clarify various holiday pay conditions including:

• simplifying holiday pay calculations by making rolled-up holiday pay (12.07% of pay) lawful for part-year workers and those who work irregular hours.
• keeping various pieces of retained EU law on allowing carry forward:
  • of all statutory annual leave to be the following year when a worker is unable to take their leave due to being on family related leave;
  • where a worker is unable to take their leave due to sickness for a maximum of 18 months at 4 weeks per year;
  • where the worker has not been given opportunity to take the leave or the employer has failed to inform them that any leave not taken, and which cannot be carried over, will be lost.
• defining ‘normal remuneration’ for the purposes of holiday pay to include commission payments and other payments, like regular overtime payments.
• removing the additional working time record keeping requirements.
• allowing small businesses (less than 50 employees) doing TUPE transfers of any size, and businesses of any size undertaking a small transfer (of less than 10 employees) to consult their employees directly if there are no existing representatives in place.

This clarity is now welcome, and the good news is that charities can use the simpler 12.07% method again going forward for those on part-time, part-year and irregular hours.

Closing thoughts

The Harpur Trust vs Brazel case is a good example of where previously held methods over a long period of time had never been tested against the actual laws and regulations in place – simply being assumed as correct. Although the original method has been written back in use by this updated Bill, charities must keep an eye on the ever-changing landscape of workers’ rights – particularly with the new Government having large amounts of legislation in progress and consider their historical position.

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