Supreme Court Holiday Pay decision – what this means for agency workers?

In an important case regarding holiday pay, the Supreme Court has confirmed that workers employed for a full leave year are entitled to receive 5.6 weeks paid holiday, irrespective of the number of weeks that they actually work during the leave year and even if that means they are entitled to proportionately more holiday than full-time colleagues.

The Supreme Court, in the case of Harpur Trust v Brazel, has ruled that statutory holiday entitlement cannot be pro-rated in respect of the number of weeks worked in a holiday year (except where employment starts or terminates during that year) and that Mrs Brazel, a music teacher who worked term time only, was entitled to the same 5.6 weeks paid leave as other workers who worked for a full year. This decision will have considerable implications for employers of workers on overarching contracts but who only work part of the year.

How will this decision affect agency workers? Given the nature of temporary supply, most agency workers will be placed with hirers on short term assignments, and many will have gaps when they are not working on assignment, so, on the face of it, their holiday entitlement may be affected by this decision. However, whether this will be the case will depend upon how the agency worker is engaged.

Most agency workers who are engaged on contracts for services, rather than contracts of employment, should not be treated as workers during any period when there is no assignment. Therefore, provided the right form of contract is in place, these workers are unlikely to be affected by the judgement and there should be no accrual of holiday entitlement outside assignments.

However, this may not be the case for employed agency workers, for example those operating through umbrella companies, here employment may continue between assignments, in some cases for the purpose of applying tax relief to travel and subsistence expenses, meaning that holiday may also continue to accrue. Agencies, or umbrella companies, who engage workers on these types of arrangements may need to review holiday arrangements, particularly those arrangements that calculate either holiday entitlement or pay based on 12.07% of time worked.

This could cause significant practical and commercial difficulties in both calculating holiday pay and funding holiday accrual for periods which are not covered by assignments, and therefore for which there is no charge to clients. For businesses operating this way a choice may be necessary between limiting holiday pay and being able to apply travel and subsistence expenses.

Holiday pay for agency workers is one of the arenas that Lawspeed will be addressing in its upcoming seminar ‘’Agency worker supply – a seminar on the rules and the risks’’, taking place on 6th October 2022 – click here for details and to book your place.

Peter Lappin is Senior Legal Consultant at the recruitment and employment law specialists Lawspeed.

Lawspeed group corporate clients benefit from immediate up-to-date advice on staff engagement and related regulation; employment status; client, IR35, PAYE and umbrella contract templates; contract review/negotiation; self-employment and CIS contract templates; trade membership and government representation; accreditation services and a state of the art digital contract management platform.