Holiday pay calculations change for temporary workers

The way holiday pay is calculated has changed for non-permanent workers.

The change by the Department for Business, Energy and Industrial Strategy reflects recent case law relating to a term-time music teacher where it was ruled that a 12-week average method should be used for computing holiday pay, rather than the 12.07% method previously used.

Workers on a full-time, permanent contract are likely to be paid their normal weekly rate of pay.

Where a worker has a part-time permanent contract, then they will also likely receive their normal weekly rate of pay for all school holiday periods.

Where, however, a worker is paid only for hours actually worked, such as:

• a worker paid by the hour
• a supply teacher provided by an agency
• a temporary worker on a short-term contract
• a worker on a zero-hours contract

then an employer should apply a 12-week holiday pay reference period (substituting any whole weeks in which no pay was received for weeks in which pay, however minimal, was received) to calculate the correct amount of holiday pay.

The 12-week holiday pay reference was judged to be appropriate for term-time workers in Brazel v The Harpur Trust [2018].

More guidance is available on the BEIS website.

Example

A part-time music teacher has a zero-hours contract entitling them to 5.6 weeks’ annual leave. They have a term-time contract meaning they work 32 weeks per year. They must take their 5.6 weeks of annual leave during the school holidays. They should therefore be paid for 5.6 weeks of leave taken at some point during the school holidays.

The school breaks up for summer holidays on Friday 25 July and the teacher decides to take a two-week paid holiday in mid-August before school returns on 10 September. The employer should therefore take an average of the teacher’s pay rate over the last 12 weeks in which they worked, starting with the last week at the end of the summer term and omitting any other periods of school holiday in which the teacher was not paid.

ACAS

According to the ACAS website, if you do casual work with no normal hours, for example on a zero-hours contract, your holiday pay will be based on the average pay you got over the previous 12 weeks.

These should be weeks in which you were paid. If you were not paid in one of those 12 weeks (because you did not work), the last paid week before that should be used to calculate your holiday pay.

Bishop Fleming Payroll Services recommend all employers with term time workers to review their current practice and revise this if necessary in light of this change.

If you would like to know more information about Bishop Fleming Payroll Services by IRIS, please click here.