On 20 July 2022, the Supreme Court delivered its judgement in the case of Harpur Trust v Brazel. Ms Brazel worked as a part-time music teacher on a zero hours contract for between 32 and 35 weeks a year. The teacher had made a claim for unlawful deductions from her wages by underpayment of her holiday pay. The Trust had countered that annual leave pay should be pro-rated using the average weekly pay calculated by looking at a full year’s pay, whereas Ms. Brazel argued that the school should use a 12 week period just before leave is taken.
This outcome will have significant impact on employers of these “part-year” or irregular workers and anyone working on an intermittent basis without fixed hours or pay. It has been concluded that these workers may be getting a lower amount of holiday pay than what they’re entitled to.
At CareLineLive we have trawled through a number of legal sites to pull together an understandable interpretation of the ruling for home care agencies. It is both interesting and frustrating that different legal professionals are drawing different conclusions so please do be aware of that as you read this article.
It is likely to impact the many home care agencies who traditionally have calculated holiday entitlement using the 12.07% method.
Employers who fall into this category should probably review their annual leave entitlement calculations for irregular hours workers and identify any shortfall in holiday pay that has been paid under the 12.07% method in comparison with the Calendar Week Method.
Historic underpayments in holiday pay for part-year staff are likely to be considered as unauthorised wage deductions. Liability for these underpayments can be backdated up to two years from the date that a claim is issued.
There are also issues arising from workers stopping their employment where any accrued but unused holiday pay entitlement on termination of employment is increased to take into account underpayments from the 12.07% method. This is not limited to two years but from either the start of employment or their statutory entitlement to 5.6 weeks, whichever is later.
Implications and options for home care agencies and employers
Many legal advisors say that as well as making payments to these part-year workers to reimburse under payments in recent years, employers of irregular employees will be prompted to make changes to mitigate problems going forwards.
In the course of our research we have found a number of suggestions that employers of irregular hours workers are considering. Each raises different issues and it is far from clear how the home care sector is best to respond. It is also not clear whether any of these suggested solutions fall foul of other regulations and we strongly advise you to do further due diligence. CareLineLive is not recommending or advising any of these solutions.
One option is for agencies to review the way they employ irregular workers. Some advisors are suggesting that these workers can be engaged on fixed-term contracts for specific projects without any expectation for further employment, and with payment of any accrued annual leave paid on termination. This suggestion is likely to raise fears of job security for the carers concerned.
Another suggestion is that agencies can pay part-year workers a lower fixed salary but include payments for any weeks where they are not working. What is now paid is a figure based on their anticipated annual working hours. This method can ensure that any holiday entitlement and pay liability is met however with so many carers already paid at the living or minimum wage this may not be a practical solution.
A third option is to engage part-year workers as self-employed contractors, potentially through intermediary entities, to lower the risk of any liability to pay holiday pay. This solution is potentially problematic as it may conflict with IR35 legislation.
How far does this holiday pay judgement go back?
A change to calculating holiday pay was introduced on 6 April 2020 where the reference period used in holiday pay calculations increased from 12 to 52 weeks. As a result the government changed its guidance on calculating statutory holiday pay for workers without fixed hours or pay to the 5.6 week multiplier method.
How does this affect CareLineLive?
We anticipate that there will be a grace period for employers to get their systems and payments in line with the new regulations. At CareLineLive we will keep abreast of what the consensus becomes on this issue and will make suitable changes to our holiday leave calculations at the appropriate time.