There has recently been a court of appeal decision about workers who only work part of the year (for example; term time only or school holidays only) and who are on permanent contracts. It’s to do with the way that holiday pay is calculated. Until now, ACAS guidelines have said that using the standard 12.07% ‘casual worker’ holiday pay calculation is fair for these workers.
The courts however recently ruled that for workers who only work for part of the year but are on permanent contracts (whether zero hours or not), holiday pay should be calculated on their actual earnings averaged over the previous 12 weeks they’ve worked, ignoring any weeks they didn’t work. The court has also said that such employees are entitled to a full 5.6 weeks holiday a year at their average weekly pay, even though they don’t work for the whole year. In practice this means that, for example, if someone works for 26 weeks a year and earns an average of £300 per week, their total holiday pay entitlement would be £300 (a week’s pay) X 5.6, which equals £1680. Using the 12.07% calculation they would only receive a total of £941.46 holiday pay.
This may not affect many clients, however it might affect some. For those that it does, it is likely to have an impact on employment costs.
So, if you have any staff who are;
1. On a permanent contract
2. Who only work part of a year
Let me know and I’ll talk you through the issues. This doesn't affect normal part-time staff.
This ruling only concerns those on permanent contracts who work part of the year (part-year workers). The Court of Appeal noted its ruling could produce odd results in extreme circumstances (for example a cricket coach working one term in a year or exam invigilators only working during exam periods). However, the Court considered that these workers would more likely be engaged on a freelance basis than a permanent contract and so would not be affected by its ruling.