Part-year workers entitled to full year paid holiday allowance, court rules

Please note, legislation has been updated in regards to holiday calculations since this article was written, effective for holiday years starting on or after 1 April 2024, so some of the content below may be out-of-date. If you’re a Moorepay client, please contact us if you need guidance. Otherwise, please see this article on the changes for more information. 

July finally saw the end of the ‘term-time’ holidays saga. The Supreme Court has endorsed the earlier Court of Appeal judgement. This debacle has lasted over seven years!

Employers who previously pro-rated the holiday entitlement for staff working part of the year on permanent contracts will have to change their practices.

It has been common practice for employers to pro-rate holidays for ‘term-time’ workers for many years. It was a perfectly logical and equitable approach. However, the Supreme Court has now ruled that such practice breaches regulations 13 and 13a of the Working Time Regulations.

If you employ ‘part year’ workers (term-time staff) they must now receive a full 5.6 weeks’ holiday. You cannot prorate this amount to reflect the number of weeks they actually work.

As an example, the holiday entitlement would become:

Previously you may well have calculated this as:

• 39 (weeks worked) + 4.8 (holidays) + 8.2 (unpaid leave) = 52

The judgement acknowledges this provides part-year workers with an advantage over their full-time colleagues. They get a full year’s holidays for a part-year’s work.

Does the ruling affect part-time staff?

It doesn’t affect part-time staff who work all year but on fewer days than their colleagues. Their holiday entitlement is still pro-rated. For instance:

• Full time member of staff working all year 5 days per week = 5 x 5.6 = 28 days holiday
• Part-time member of staff working all year 3 days per week = 3 x 5.6 = 16.8 days holiday

How should I handle the holiday allowance of term-time staff who start or leave midway through the year?

You still reduce holidays for term-time staff who start or leave during the year. You treat them like any other starter or leaver. Except, you pro rate based on a minimum of 5.6 weeks of holiday – even if their ‘working year’ is only 38 or 39 weeks.

Following a recent change in statutory regulations, you also average holiday pay over the last 52 weeks actually workede.g., ignore complete weeks in which someone’s been off sick.

Last year, the Department for Business, Energy and Industrial Strategy produced guidance to assist in calculating holiday pay. Although this predates the Supreme Court judgement, it does reflect the Court of Appeal decisions. Therefore, this guidance is still entirely relevant.

Considerations for casual staff

The judgement also references potential impact on ‘zero hours’ staff. If you use the Moorepay ‘casual work’ scheme, we already advise against using ‘casual’ staff on a regular basis. Moorepay advises paying casual workers their holidays for each separate assignment.

Casuals should only be used for occasional ad hoc assignments. If work becomes frequent or conforms to a regular pattern, it isn’t ‘casual’. There could be implications for continuity of employment and staff could also qualify for a full-year’s holiday entitlement.

Find out more about rights and entitlement for zero-hour or casual members of staff.

Could workers be entitled to back pay following the ruling?

You may be concerned about the impact of ‘back pay’. If you’ve already received claims from part-year staff, this may well set an effective date.

Where you’ve had no claims, there’s more flexibility. You may decide to increase holidays in the current leave year. Of course, you may then receive requests for additional backdating. If you’re a Moorepay customer, we suggest you contact us for advice if this happens. Normally there’s a backstop of two years on such claims but please speak to us.

Unless your contractual holiday provisions exceed 5.6 weeks per annum, factor any increased holiday entitlement into staff physical leave entitlements. You should not make a payment in lieu unless you are dealing with a leaver.

How to implement this change for term-time workers

Most ‘term-time’ workers follow a school year and take their leave during fixed school closure periods. If you average their pay over 12 monthly instalments, it will increase marginally. They’ll nominally receive a few extra days holiday but there’s no real change in their working pattern. They continue to be off throughout the school holidays but now, their average monthly pay will reflect a few more days holiday.

For those clients who’ve advised us they utilise term-time staff, we will provide you with an updated principal statement template at your next annual review. In addition, customers can contact our advice line on 0345 073 0240 for guidance.