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How does the new holiday pay ruling affect your business?

According to People Management, a recent survey found that 88% of employers don't understand how the Supreme Court ruling earlier this year in Harpur Trust v Brazel affects how they calculate holiday in their business. The survey found that only 11% of employers had adapted their processes after the ruling. Businesses that don't update their processes run the risk of employment tribunal claims from their employees.

What was the ruling?

Handed down in July this year, in Harpur Trust v Brazel the Supreme Court held that the percentage method of calculating holiday pay, where employees only work part of the year and are given holiday pay equivalent to 12.07% of the hours they work, is unlawful. The ruling states that employees who work on part-year contracts should receive the same amount of annual leave as those working a full year. The case was in reference to a visiting music teacher at a trust but has much farther-reaching implications. Part of the problem with the ruling, however, is whilst it tells employers what not to do, the ruling itself is not completely clear about what they should do to remedy the issue.

What does this mean for business?

If you've got anyone working in your business for only part of the year you need to check the way you're calculating their annual leave to make sure it isn't unlawful.

How do I check what I'm doing is correct?

If you've got a professional running your payroll for you they should be all over this point but get in contact with them to double-check. If you run your own payroll there are a couple of tools you can use to make sure you're doing things correctly;

What happens if I don't make a change?

If you are calculating someone's holiday incorrectly you'll be in breach of contract and could face employment tribunal claims and owe your employees money so it's really important this point is addressed. Equally, you don't want to damage your reputation as a business by becoming known as a company that doesn't pay people correctly so getting it right is super important.

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  • All information within this post is provided for guidance only, always seek your own legal advice

  • The information with this post was correct at the time of publishing, October 2022 but may be subject to change


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