Holiday Pay – Where Are We Post-Brazel? A Guide For Schools

The last few years have been significant for holiday pay. In July 2022, the Supreme Court released its decision in the high profile case, Brazel v Harpur Trust, which ruled that the sector standard approach for pro-rating holiday pay and entitlement for workers that only worked part of the year was unlawful. Prior to this case, the legislation had been silent on how to calculate holiday pay and entitlement for workers that only worked part of the year meaning that many schools had adopted their own approach to calculating holiday; for many schools this was pro-rated at 12.07% of the hours worked.

Pre-Brazel

Holiday pay was also often ‘rolled up’ for casual workers but earlier case law had deemed this to be unlawful as well. The decision in Brazel confirmed that the likes of peripatetic music teachers, exam invigilators and seasonal sports coaches were actually entitled to the same amount of holiday as permanent staff who worked year round, meaning that many casual workers, engaged on permanent contracts, had been underpaid. This decision left us with a peculiar situation where a worker who, for example, had only worked one or two days in a 52 week period, would still be entitled to the same 5.6 weeks’ paid leave as a full time worker.

Shortly after the Brazel decision, the Government launched a consultation to seek views on how holiday pay and entitlement should be calculated for part year workers. This consultation closed in March 2023, and in November 2023, it was announced that new regulations would be introduced to legislate for calculating holiday pay and entitlement for these workers.

The snappily titled Employment Rights (Amendment, Revocation and Transitional Provisions) Regulations 2023 (the “Regulations”) came into effect on 1 January 2024. They have made a number of significant changes to holiday pay legislation, but in particular, how much holiday some workers are entitled to and how their holiday pay should be calculated.

Given the prevalence of part year workers in the education sector, the introduction of the Regulations is extremely relevant to schools.

The New Rules

1. New rules for workers that work irregular hours or only part of the year

What has changed?

The decision in Brazel has now, in effect, been overturned following the introduction of the Regulations. Workers who work irregular hours or part of the year (where they meet the definition in the Regulations) will accrue holiday at a rate of 12.07% of the hours worked, subject to a maximum of 28 days’ leave per year.

The Regulations have, for the first time, defined both ‘irregular hours’ and ‘part year workers’. Some term time only staff will satisfy both of these definitions, and the new regulations may therefore apply to them.

The Regulations also provide guidance on when to round up or down holiday entitlement. For example, where the fraction of accrued annual leave is calculated to be less than 30 minutes it should be treated as zero, but should be rounded up to one hour, if it is 30 minutes or more.

This change will come into effect for holiday leave years beginning 1 April 2024. For many schools, the holiday year will run 1 September to 31 August, meaning that changes to holiday pay or entitlement under the Regulations do not need to be made until the next academic year.

What do schools need to do?

The impact of this change will depend on what action the school took in response to the Brazel decision and how you were calculating holiday pay at this point.

For schools that were pro-rating holiday at 12.07%, and who did not make a change when the Brazel decision was announced, no changes should be necessary as the existing approach will be lawful from the next holiday year. There is however still a risk of employment tribunal claims for the underpayment of holiday pay for the period leading up to the start of the next holiday year. This is however time limited to three months plus the six week early conciliation period from the date of the last deduction. We recommend taking legal advice on your potential exposure if this is something that you are concerned about.

For schools that made changes to holiday entitlement to be Brazel-compliant but who now want to reduce this entitlement to reflect the Regulations, we recommend that legal advice is sought as soon as possible. Changes to holiday pay and entitlement should not be made unilaterally, and a consultation process may need to be followed to minimise the risk of claims and to preserve employee relations given that the effect for some workers will be less take home pay.

We also recommend that you undertake an audit of holiday pay and entitlement for your workforce. If comparable full time workers are entitled to more than statutory minimum holiday (i.e. more than 5.6 weeks) then there may be a risk of claims under the Part time Workers (Prevention of Less Favourable Treatment) Regulations 2000 if you were to treat the part year workers less favourably. If this applies to you, we recommend seeking legal advice.

You may also need to issue workers with updated contracts, and amend your holiday policies to reflect the change in holiday entitlement for the next academic year. You should consider how you notify effected workers of how much holiday they have accrued and been paid for in each pay period. It is likely that some administrative changes will be needed from next academic year.

2. Rolled up holiday pay

What has changed?

Rolled up holiday pay refers to the practice of topping up a worker’s pay to reflect the holiday they have accrued in a pay period. This is particularly common in the education sector, with many schools still operating this practice despite it being technically unlawful since 2006. The Regulations will now permit this practice with effect for holiday years beginning 1 April 2024 (which may be 1 September for many schools). Under the Regulations, workers will be entitled to an additional 12.07% of their total hourly pay for each hour worked for holiday pay. As above however, there is still a risk that claims may be brought until the law changes.

What do schools need to do?

If you decide to roll up holiday pay, you must ensure that the worker’s pay slip clearly identifies the amount they have been paid for accrued holiday for that pay period.

As above, you may also need to issue workers with updated contracts to refer to rolled up holiday process to be compliant with section 1 of the Employment Rights Act 1996. Any policies on annual leave may also need to be updated ahead of next academic year.

3. Calculating a ‘week’s pay’ for holiday pay

What has changed?

The calculation for a week’s pay within the Employment Rights Act 1996 was not created with holiday pay in mind. Case law stepped into this breach and we have seen a series of cases coming through the tribunal system dealing with issues such as overtime.

The Regulations now amend the act to confirm the position from that case law, namely that all full-year workers, except those who are genuinely self-employed, are legally entitled to 5.6 weeks of paid statutory holiday entitlement per year. Four weeks of this entitlement must be paid at a worker’s ‘normal’ rate of pay which must now include:

• Payments intrinsically linked to the performance of tasks a worker is obliged to carry out under the terms of their contract (e.g. commission);
• Payments related to professional or personal status related to length of service, seniority or professional qualifications; and
• Other payments such as overtime which have been regularly paid to a worker in the 52 weeks preceding the calculation date.

The remaining 1.6 weeks’ of holiday entitlement can be paid at a worker’s ‘basic’ rate of pay.

What do schools need to do?

If a school calculates holiday at the start of each holiday year and pays it to its workers in 12 equal instalments, as many schools do, these payments may need to be topped up to take into account the new definition of ‘normal pay’. Failing to do so will put the school at risk of an unlawful deductions claim for paying less holiday pay than they are entitled to.

4. Carry-over of holiday

What has changed?

• The Regulations allow all workers to carry over four weeks of holiday if:
• They have not had a reasonable opportunity to take it or have not been encouraged to take it
• They have not been advised that they will lose it if they do not use it
• They have been wrongly treated as self-employed and haven’t been given leave to take

Due to illness, the worker has not been able to take leave. In these circumstances they have 18 months from the end of the leave year within which it accrued to take that leave. This reflects the previous position established in case law.

What do schools need to do now?

The impact of this change is less significant for schools as many staff will take their leave during school holidays.

However, for some senior staff, such as the head where there may be an expectation to work during holidays, or for school business managers who work year round, schools will need to ensure that they encourage these staff to take their leave.

For those staff that are paid rolled up holiday pay, schools will also need to encourage these staff to take holidays, rather than work 52 weeks of the year, to avoid falling foul of the Regulations.

Need more guidance?

Holiday pay arrangements for atypical workers can be tricky, and given the recent changes, it is important to ensure that you are getting things right. If you have any further questions, or wish to seek clarification on any of the above, please do contact one of the team.

If you would like to learn more, our schools’ team is hosting a free 45 minute webinar demystifying the rules on holiday pay on Tuesday 5 March at 9:30am.

If you would like to read more about this topic, read our other article called ” Holiday pay for “part-year” workers – do you need to review your approach? |Harpur Trust v Brazel “