Schools are in a “really difficult situation” over holiday pay despite plans to change a rule that has left academy trusts liable for hundreds of thousands of pounds in back pay, lawyers say.
The planned change concerns the way holiday pay is calculated for staff working irregular hours or on term-time contracts - who can include support staff - and follows a landmark legal ruling last year.
The Harpur Trust v Brazel Supreme Court judgement has left schools vulnerable to claims for as much as two years’ back pay for underpaid holiday.
The government said the court ruling meant that “part-year” workers were entitled to a larger holiday entitlement than part-time staff working the same number of hours.
It has now confirmed plans to introduce regulations to allow trusts to calculate holiday pay using a method that was widespread before the judgement.
However, this still leaves many schools and trusts in a difficult position, lawyers have told Tes.
Music teacher Ms Brazel brought the case after the Harpur Trust changed its method for calculating holiday pay, with the effect of reducing hers.
Under the newer method, the trust calculated her hours worked at the end of each term, took 12.07 per cent of that figure and then paid her hourly rate for that number of hours as holiday pay.
But, under the Supreme Court judgement, all workers on a permanent contract throughout the year, including part-year ones, are entitled to at least 5.6 weeks of holiday a year, regardless of how many weeks they have actually worked.
The Department for Business and Trade (DBT) said this resulted in part-year workers being entitled to a greater annual leave entitlement than part-time workers who work the same number of hours across the year.
Following a consultation on plans to amend this, the DBT has now said it is legislating to introduce a method for calculating holiday pay for workers based on actual hours worked, coming into force on 1 January 2024, pending approval in Parliament.
“This accrual method was also widely used before the Harpur Trust judgement and better reflects what workers have actually worked in the current leave year, as annual leave is accrued based on time worked each pay period,” the government said in its consultation response published earlier this month.
Trusts could still face holiday pay claims
Joanne Moseley, lead practice development lawyer at law firm Irwin Mitchell, said that the new regulations will save schools money overall, but they will have to plan any changes carefully.
Most schools will have to wait until their current holiday year ends to introduce the new rules, in August or September, Ms Moseley said.
”Until these changes come into force, the law, as interpreted by the Supreme Court in Brazel, continues to apply. The approach that schools take will, therefore, depend on how they reacted to that decision,” she explained.
For example, she said, some schools changed their terms and conditions to comply with the ruling and have already negotiated back pay, whereas others have waited before making any changes.
Schools that wait for the new rules to kick in “could face legal action for claims in the meantime”, she warned.
But even after a school changes its policy, staff could still bring claims for outstanding holiday pay, and have three months to issue a tribunal claim.
“Those that haven’t made any changes need to think about what their potential liability looks like and should probably earmark some money if claims are brought, as compensation can go back two years,” Ms Moseley said.
Meanwhile, those that changed their contracts to comply with the Brazel ruling are now “going to have to persuade their staff to accept less holiday”, she said, adding that this would involve a consultation process to enforce the changes, “and that’s not an easy thing to do”.
“So schools are between a rock and a hard place, whichever approach they took,” she said.
Jean Boyle, partner and head of education sector at law firm Stone King, said that while many schools would likely prefer the 12.07 per cent method, proposals to legislate could still leave some schools in a “really difficult situation”.
“Many were waiting to see the outcome of the consultation to make changes to how they calculated entitlement, but some already had after the judgement,” she said.
‘A route to sanity’
Micon Metcalfe, chief financial officer at the Diocese of Westminster Academy Trust, welcomed the planned legislation.
She said the Supreme Court ruling had made holiday calculation “quite difficult to work out” and that the government’s plans would effectively mean trusts reverting to the method they were using before.
She described this as “preferable”, but added: “We still have to address the time between Brazel and this legislation coming into force, though. There needs to be some work around calculating historic holiday pay.”
Rob McDonough, chief executive of East Midlands Education Trust, told Tes that his trust also welcomed the prospect of a “fairer” system under new legislation.
“For us, we were quite badly hit by the Harpur v Brazel ruling,” he said.
His trust had earmarked £700,000 to fund two years of back pay but it ”will be paying less than we were under Harpur v Brazel”.
“There are still lots of things to work out but [the regulations] will give us some consistency and provide a bit of a route to sanity after Harpur v Brazel,” he said.
Leora Cruddas, chief executive of the Confederation of School Trusts, said: “This is a very complicated area that has created uncertainty for many school trusts for several years, as the case went through the courts.
“While it will take some time for individual trusts to fully understand the implications of the government’s plans, and a final outcome it is still dependent on new legislation, this is an important step in getting clarity for part-time staff and their employers.”
The Department for Education was contacted for comment.
