School leaders face a “dilemma” after the government launched a review that could prevent them from having to pay out thousands in holiday pay, lawyers have told Tes.
Last summer, the Supreme Court announced a long-awaited legal decision, clarifying that all workers on a permanent contract throughout the year - including part-year workers - are entitled to at least 5.6 weeks’ holiday a year, regardless of how many weeks they actually work.
Some trust leaders called the judgment “absurd”, and say it will cost them thousands of pounds a year, as well as back pay that many have already shelled out for.
But now the government has launched a consultation after saying that the Harpur Trust v Brazel judgment means that part-year workers are entitled to a larger holiday entitlement than part-time workers who work the same total number of hours.
It has said it is “keen to address this disparity to ensure that holiday pay and entitlement received by workers is proportionate to the time they spend working”.
The move means schools face “really hard” questions over what to do next pending the outcome of the consultation, according to legal experts.
How much is the ruling costing schools?
The way that many schools previously calculated holiday pay for their part-year staff resulted in these workers receiving less than 5.6 weeks’ statutory holiday entitlement.
Lawyers warned that schools could also face claims for as much as two years’ back pay for underpaid holiday.
And several trust leaders and headteachers have already made these back payments.
Chris Parham, head of St Issey C of E Primary School in Cornwall, said schools in his trust, which covers around 600 pupils, had paid around £5,000 in back pay at the end of last year.
Meanwhile Rob McDonough, chief executive of the East Midlands Education Trust, said the ruling would cost his trust an additional £110,000 per year and a further two years’ worth of back pay worth £220,000 in total.
“It does seem an absurd ruling which requires employers to offer their full holiday entitlement, in our case 32 days including the bank holidays, to a casual worker who we might employ for just a few hours,” he said.
What is the government planning to do?
The government has said in a consultation document that it is “considering introducing legislation” to resolve the disparity caused by the ruling, by allowing employers to pro-rate holiday entitlement for part-year workers so that they receive leave in proportion to the total annual hours they work.
It adds: “The simplest way to do this would be to introduce a 52-week holiday entitlement reference period for part-year workers and workers with irregular hours, based on the proportion of time spent working over the previous 52-week period.”
The government consultation runs until 9 March, and “seeks to understand the implications of the judgment on different sectors including agency workers who have complex contractual arrangements”.
What should school leaders do?
Legal experts have said that the consultation causes a dilemma for schools on whether they adjust their policies to meet the law as it stands, and whether to make back payments.
Jean Boyle, partner and head of the employment and regulatory team at Stone King, said the consultation was a complete surprise and that it posed “really hard” decisions for schools.
“What we’re suggesting is there is potential to wait and see before changing your policies on holiday pay,” she said.
“If schools act now and make changes to the way they calculate holiday pay in the future, they could spend a lot of time and effort on this before potentially having to revert back if as a result of the consultation the government changes the law to what schools were doing anyway.
“But having said that, the law is the law as it stands at the moment. Schools could still face litigation if they do not change their policies - as the position is as per Harpur until the law actually changes, so each school will have to review and assess their own particular situation.
“Whether you pay out back pay is an even harder question. You could also hold out on this, but even if the law changes as a result of this consultation, back liability may remain, because before the government changes the law, then the Harpur ruling may still stand. Ultimately, we need to know the outcome of this consultation and the legislation that follows.”
Jenny Arrowsmith, partner and education sector specialist at law firm Irwin Mitchell, said that the decision in the Brazel ruling reflected the law as it currently stands and that many schools had already adjusted the holiday entitlement of their casual and term-time staff to reflect it.
She said that if new legislation came into force, “schools face a dilemma”.
“Do they attempt to reduce the holiday entitlement of term-time workers in line with new legislation or only apply it to new staff?
“Existing staff are unlikely to agree to receive less paid holiday than they currently get which means that schools would have to force through the change via terminating their contracts and offering to re-engage them on new ones. That process is fraught with risk and will inflame existing industrial tensions.”
Ms Arrowsmith said that one option for schools would be to include contractual wording in relevant employees’ contracts which allows the employer to reduce holiday entitlement if the law changes as a result of legislation.
“But that will need to be precisely worded to stand a chance of being enforced,” she said.
Louise Hatswell, pay specialist at the Association of School and College Leaders, said the ruling added to “the already unwieldy stack of cost pressures that must be met from budget allocations”.
“There are significant variations in the calculations previously used to work out holiday pay, and therefore the exact impact on schools will differ,” she added.
“The ruling also has the potential to disproportionately impact special schools due to the larger number of support staff employed, with the majority being termtime only.”
She said that ASCL would be gathering responses from members before responding to the government consultation.
A spokesperson for the Department for Business, Energy and Industrial Strategy, which launched the consultation, said: “All employers must comply with the law as it currently stands.
“We recognise that this is a complex issue and that is why the government has launched a consultation on calculating holiday entitlement for part-year and irregular hours workers.”
