Ms R Adams and others v Perth and Kinross Council: 4101506/2025 and others
EMPLOYMENT TRIBUNALS (SCOTLAND)
Case No 4101506/2025, 4103206/2025
Between
Ms R Adams and othersClaimantPerth & Kinross CouncilRespondent
Before
Employment Judge S MacLeanMr B Napier KC for respondentDate 22 May 2026
JUDGMENT
The judgment of the Employment Tribunal is that, by reducing the claimants’ holiday pay from January 2025, the respondent made unlawful deductions from the claimants’ wages.
REASONS
[1]The claimants are employed by the respondent, a local authority, on part-year or term-time contracts. The employment of the first group of claimants (the legacy employees) commenced before 1 January 2023. The employment of the second group of claimants (the new employees) commenced after 1 January 2023.[2]The legacy employees contend that, by increasing their pay from January 2023, the respondent varied their contracts of employment with effect from that date, thereby conferring on them a contractual entitlement to increased holiday pay. They assert that the respondent’s subsequent decision to reduce their pay from January 2025 has resulted in unlawful deductions to their wages.[3]The new employees contend that the terms under which they were originally employed entitled them to the higher level of holiday pay that they received from the start of their employment. They also assert that the respondent’s decision to reduce their pay from January 2025 has resulted in unlawful deductions from their wages.[4]The respondent submits that, following the Supreme Court’s decision in Harpur Trust v Brazel [2022] UKSC 1, it unilaterally changed the method of calculating holiday pay with effect from 1 January 2023 to ensure that it was no longer paid on an unlawful pro‑rated basis. In January 2025, the respondent adjusted the level of pay for statutory holidays to give effect to the change in law governing the calculation of statutory holiday pay. The respondent contends that this does not amount to a breach of contract and that the claims of unlawful deduction from wages are not well founded and should be dismissed.[5]A case management preliminary hearing took place on 27 October 2025 at which parties undertook to endeavour to prepare an agreed statement of facts; prepare a single file of documents and exchange skeleton arguments in advance of this final hearing.[6]At the hearing, Mr Deans represented all the claimants. Mr Napier, who was instructed by Ms McLaren, Solicitor, represented the respondent. I was provided with a file of documents and an agreed statement of facts. The representatives confirmed no additional evidence was to be led. They proposed to address me orally on the skeletal arguments that they had previously exchanged.[7]The agreed statement of facts, as provided by the parties, is set out below. The letters in brackets correspond to the documents in the file provided. I have adjusted the page numbering so that it accurately reflects the number on the document to which I was taken. Agreed statement of facts[8]The claimants, who work term-time or part-year, are employed by the respondent on terms of employment providing for fixed hours. Holiday pay for such employees was, until January 2023, calculated by a system that prorated all leave entitlements to the number of working weeks and hours worked. A percentage uplift was not applied - all leave entitlement was prorated based on length of continuous service and the working year for the post. This means that the pro-rata entitlement would vary depending on length of service and the number of weeks worked in the post. Holiday pay was paid monthly as part of basic pay on a ‘rolled-up’ basis. See template statement of written particulars (99-110).[9]The statement of terms and conditions of legacy employees are found at (JB 274-279). These include a section on Annual Leave (paragraph 4) and at the end of the contract, a section in a box in bold regarding changes to terms and conditions (279).[10]Following the decision of the Supreme Court in Harpur v Brazel (22 July 2022), the respondent changed the calculation of holiday leave for their employees working fixed hours as the pro-rating statutory leave of 28 days to weeks worked was not in compliance with the requirements of the Working Time Regulations 1998.[11]Because of the linkage between holiday entitlements and pay, any change in the calculation of leave necessarily affects pay, and the effect of the decision in Harpur v Brazel was that leave entitlement (and thus pay) would be increased when the pro-rating of leave was removed. (See Holiday Pay impact of Harpur v Brazel case, 127).[12]Harpur v Brazel was not concerned with the calculation of leave provided by the respondent in addition to the leave required to be provided under the Working Time Regulations 1998. Such additional leave was commonly referred to as “additional” or “contractual” leave. The respondent decided as a matter of policy that it would from 1 January 2023 remove pro-rating from additional leave as well as from statutory leave.[13]A national collective bargaining agreement exists between the respondent and recognised unions (red book) (322-393).[14]There was in 2022 no local collective bargaining agreement between the respondent and its recognised unions (including UNISON) over holiday pay as a discrete element of salary, but under the red book agreement (2013) there was an obligation on councils to ensure that their employees received their statutory entitlements to leave. The red book also set out (clause 7.4, 206) a minimum paid annual leave entitlement of 28 days including public holiday entitlement. (This is now 29 days, due to the additional day awarded through the 2022 SJC pay settlement.) The respondent complied with this provision and also paid a further 5 days above 28 (or more, depending on length of service) of additional leave under its own leave policies. In 2022 the total paid leave entitlement for a pupil support assistant employee working 195 days per annum with no years of continuous service was based on 33 days, reducing to 28.26 days when pro-rated (129).[15]The respondent took the decision to end pro-rating of all leave from 1 January 2023 and to increase pay accordingly, without obtaining the agreement of either the recognised unions or individual employees (152-3).[16]From January 2023 onwards, the respondent issued statements of employment particulars to new employees. Paragraph 5 of these terms deals with annual leave (283-4).[17]The respondent sent a Briefing Paper to the unions on 24 January 2023 (127- 143).[18]The respondent uploaded a message to its intranet on 30 January 2023 regarding annual leave calculations (302).[19]From January 2023 onwards, the respondent issued standard terms to new employees with the wording as set out at (280-288).[20]With effect from 1 January 2023 the leave entitlements of employees working term-time/part-year on fixed hours were increased so that all such employees became entitled to not less than the full amount of statutory leave (28 days) and additional leave (5 days or more, depending on length of service) to which full-time employees were entitled.[21]The claimants’ union and the respondent exchanged emails during May 2023 regarding the changes to pay (151-156).[22]The Government undertook a consultation exercise in early 2023 and concluded it would legislate to allow entitlement for statutory leave for term time /part-year workers to be calculated as 12.07% of hours worked in a pay period. The effect of this was to permit under the amended Working Time Regulations 1998 the system of pro-rating of statutory leave to days worked, and thus effectively reversed the impact of the Harpur v Brazel decision for such leave. The change was made by The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023, which came into force on 1 January 2024.[23]The effect of re-introducing pro-rating for statutory (but not additional) leave was that leave entitlement for employees working term-time/part-year hours was reduced by an average of 3.20 days per annum. A reduction of 3.59 days is based on the example provided (165) of an employee with four years’ service working 27.5 how for 195 days and with 9 days of additional leave but this is not the case for all employees as there are different working years.[24]The contested deductions made from salary which form the basis for the present claims represent the value of the removal of pro-rating of statutory leave, as appropriate in individual cases, spread over the year and paid monthly as rolled-up holiday pay.[25]The respondent sent a communication of 1 October 2024 to employees (163- 172).[26]The claimants’ union protested the proposed changes on behalf of its members on 12 December 2024 (307) and 30 January 2025 (311) PKC responded on 11 February 2025. The issue[27]The complaints are of unlawful deduction from wages. The issue to be determined was whether the purported change to holidays entitlement (and pay) was contractual and whether the payment of less than the sums properly due was lawful. Discussion and deliberations[28]I was referred to section 13 of the Employment Rights Act 1996, which provides that an employer shall not make a deduction from a worker’s wages unless the deduction is required or authorised by statute or by a provision of the contract, or the worker has previously given written consent.[29]A deduction arises where the amount paid is less than the wages properly payable. “Wages properly payable” is not exhaustively defined within section 13 but derives meaning from section 27 and relevant law.[30]Section 27(1) provides that “wages” includes holiday pay. Wages “properly payable” are those which fall within that definition and are legally due under contract, statute, or otherwise at the relevant time. The Tribunal must therefore determine what the worker was entitled to be paid, not what the employer believed was due.[31]I therefore considered what holiday pay was properly due.[32]The parties agreed that a collective bargaining agreement existed, requiring the respondent to ensure employees received statutory leave, pro‑rated where appropriate.[33]The respondent did not enter into collective bargaining or reach an agreement with the unions over leave entitlement for its term-time and part-time employees. The obligation was limited to ensuring the employees received the statutory minimum.[34]The statement of employment particulars for legacy employees referred to total leave comprising annual leave and public holidays, with annual leave increasing with service and pro‑rated for irregular hours.[35]The respondent submitted that annual leave included both statutory and additional contractual leave. While I accepted that statutory requirements were met, I did not consider that the statement distinguished between statutory and contractual leave or indicated that different elements would be treated differently.[36]The statement also provided that any changes to the terms and conditions “would be recorded within one month of the change taking effect”. I accepted the claimants’ submission that this provision relates only to the method and timing of notification of changes. It does not confer any underlying right on the respondent to make unilateral variations, nor does it identify or explain the mechanism by which any amendment to the terms and conditions might lawfully be made.[37]From January 2023, the respondent unilaterally changed the method of calculating holiday pay.[38]Communications to UNISON and via the intranet referred to changes to annual leave calculations no longer being on a pro-rated basis following a Supreme Court decision and possible future developments following a Government consultation exercise. However, the communications did not clearly distinguish types of leave, were not issued individually to employees, and did not authorise deductions.[39]From January 2023, increased holiday pay was paid and accepted by employees.[40]The claimants contended that this amounted to a unilateral variation of their contracts. The respondent argued that the increase in statutory holiday pay did not alter contractual entitlements. It arose from a statutory, not a contractual, obligation. The fact that the dispute concerned the amount of wages paid did not mean that the right had a contractual foundation. The respondent contended that the change merely brought its holiday pay arrangements into line with what the Working Time Regulations, properly interpreted, required.[41]It was agreed that the right to payment for statutory leave under the Working Time Regulations does not confer a contractual right. While the respondent submitted that there was no indication it ever sought to make payment in respect of statutory leave a contractual matter, nor any reason why it would have been necessary or desirable to do so, I did not agree.[42]The contractual documentation and communications treated all leave uniformly, without distinction. The decision in Harpur Trust clarified the correct approach to the calculation of statutory holiday pay under the Working Time Regulations. It did not affect any change to contracts of employment, nor was there any statutory amendment to the law at that time. The respondent nevertheless decided to recalculate all annual leave for the affected employees.[43]The communications regarding possible future changes following the outcome of Government consultation were vague, not directly communicated to the affected employees, and did not clearly identify any potential outcome might be a reduction in pay.[44]I accepted that the respondent’s actions amounted to a unilateral variation of contract, conferring an entitlement to the increased level of holiday pay.[45]Employees engaged from January 2023 were issued with contractual documentation referring to “annual leave” without distinction. The respondent did not reserve any power to vary contractual terms unilaterally. Although those employees were informed that, depending on the outcome of a Government consultation, the calculation of holiday pay might change, that wording was imprecise. It conveyed no more than the possibility of change and did not indicate that any change might result in a reduction in pay.[46]In my judgment, those employees were entitled from the outset to the higher level of holiday pay.[47]Between January 2023 and December 2024, the respondent consistently paid increased holiday pay. That practice formed part of the contractual entitlement.[48]In October 2024, the respondent decided that the implementation of the Employment Rights (Amendment, Revocation and Transitional Provisions) Regulations 2023 (the 2023 Regulations) permitted a return to holiday pay being calculated on a pro‑rated basis in accordance with the Working Time Regulations. It argued that no contractual notice was required, although it did so. When writing to managers in October 2024, the respondent distinguished between statutory and contractual leave and stated that the reintroduction of pro‑rating from 1 January applied to statutory leave. That was also the position set out in the letters sent to individual employees on 1 October 2024.[49]From January 2025, the respondent reduced holiday pay for the claimants in relation to statutory holiday pay by implementing the pro-rated method used before January 2023.[50]UNISON on behalf of its member communicated objections to the changes (or proposed changes) made by the respondent to holiday pay being paid on a prorate basis.[51]The respondent submitted that the 2023 Regulations permitted a return to holiday pay being calculated in a pro-rated basis in accordance with the Working Time Regulations.[52]I accepted the claimants’ submission that the 2023 Regulations reinstate a statutory regime for the calculation of statutory holiday pay. That regime set a floor below which an employer could not lawfully pay without breaching the Working Time Regulations. The 2023 Regulations do not require or authorise reductions in pay, nor provide a defence to claims under section 13.[53]I considered whether the claimants authorised the deductions. I concluded they did not. The communications relied upon by the respondent were insufficiently clear and did not amount to consent or contractual authority to make reductions in pay. Nor did the contractual documentation confer any power of unilateral variation.[54]I conclude that, from January 2023, the respondent varied the contracts of legacy employees so as to confer a contractual entitlement to increased holiday pay. New employees were likewise entitled to payment on that basis. The respondent retained no express or implied right to vary those terms unilaterally. The 2023 Regulations did not authorise the reduction in pay. The claimants did not consent to the change in January 2025. Accordingly, the reductions implemented from January 2025 constituted unlawful deductions from wages.