The Supreme Court held that workers who are on permanent contracts, but who are only required to work for part of the year (e.g. workers on term-time-only or zero-hours contracts), are entitled to a minimum of 5.6 weeks’ holiday a year. Their annual leave entitlement cannot be pro-rated on account of the weeks in the year when they are not required to work.
Under the Working Time Regulations 1998 (WTR), workers are entitled to a minimum of 5.6 weeks’ annual leave per year. There are express provisions which allow an employer to pro-rate this entitlement in the following circumstances:
- In the worker’s first and final holiday year, on account of the fact the worker has worked an incomplete year; and
- If the worker works part-time (in which case the worker will be entitled to fewer days’ annual leave but this should still equate to at least 5.6 of their shorter part-time weeks).
The WTR does not make specific provision to pro-rate the leave entitlement of a worker who was contracted year-round, but who is only required to work for part of each year.
A part-time music teacher, B, was engaged by a school under a permanent zero-hours contract that remained in place year-round. B worked variable hours during term-time and was not required to work at all during the school holidays, when she was required to take her accrued holiday. The school calculated B’s holiday pay based on 12.07% of the pay received by B for the hours she had worked in the previous term and paid this accrued holiday pay at the end of each school term. Government guidance at the relevant time did refer to a 12.07% calculation in the context of casual workers with irregular working hours, but this was aimed at calculating holiday entitlement (ie time off), as opposed to payment for accrued holiday (ie holiday pay). B brought a claim arguing that the method of calculation her employer used was not compliant with the WTR.
The employment tribunal found in favour of the school and held that term-time-only workers should have their annual leave entitlement capped at 12.07% of their annual earnings. The employment tribunal’s decision was later overturned on appeal by the EAT, which held that the employer had been entitled to pro-rate B’s annual leave entitlement on account of the fact she was not required to work year round.
The Court of Appeal dismissed the employer’s appeal and held that workers who are contracted year round, but who are only required to work for part of the year (eg workers on term-time only or zero-hours contracts), are entitled to the full 5.6 weeks’ minimum holiday entitlement each year. Pro-rating of their annual leave is only permitted in the first and final year of employment (to reflect the incomplete leave year), or on account of their status of a part-time worker; their annual leave entitlement cannot be pro-rated on account of the weeks they were not required to work. The employer appealed to the Supreme Court.
Supreme Court decision
The Supreme Court dismissed the employer’s appeal and upheld the Court of Appeal’s decision that workers who are on permanent contracts, but who are only required to work for part of the year, are entitled to a minimum of 5.6 weeks’ holiday a year. Their annual leave entitlement cannot be pro-rated on account of the weeks in the year when they are not required to work.
What does this mean in practice?
1. Which workers are covered?
The decision affects workers who are engaged on permanent ‘year-round’ contracts, but who are only required to work for part of the year. Most commonly, this will include:
- Term-time-only workers (eg teachers or those granted this option as part of a flexible working request);
- Permanent seasonal workers (eg exam invigilators, football stewards); and
- Workers engaged on permanent zero hour’s contracts (ie those who do not sign a new contract each time they are offered a work assignment).
2. How many days’ statutory holiday are part-year workers entitled to?
Although part-year workers are entitled to 5.6 weeks’ statutory holiday, this does not necessarily translate to 28 days’ holiday. The precise number of days’ holiday will depend on the regular working pattern of the particular worker (during the part of the year they are required to work). For example:
- If a term-time-only worker is required to work five days a week during school term-time only (39 weeks), then their statutory holiday entitlement will be 28 days (5.6 x 5 = 28); or
- If a part-year worker regularly works four days a week in the six months (26 weeks) of the year when they are required to work, then their statutory holiday entitlement will be 22.4 days (5.6 x 4 = 22.4).
3. Is there any alternative?
Going forward, it may be possible to use shorter fixed-term contracts to mitigate the burden of additional cost for increased holiday entitlement. The decision does not apply to workers who are only engaged for part of a year (eg a worker engaged on a fixed term contract for a single school year running from September until July, or a seasonal worker employed on a short-term contract for four months during a busy period). Special rules apply to automatically pro-rate the holiday entitlement of such workers on the basis that they are not engaged for a complete holiday year (see above).
Our employment team has lots of experience of advising employers on holiday entitlement issues and your usual employment contact will be able to provide you with individual advice on a case-by-case basis.
Article by Emma Ahmed of Hill Dickinson