The Government has brought several significant changes to holiday pay at the start of 2024 which employers should be aware of. The main idea behind the newly introduced reforms is to simplify holiday entitlement and holiday pay calculations found within the Working Time Regulations. This article outlines the main changes.
Changes only affect certain classes of worker
The changes only affect workers with irregular hours or workers who only work part of the year.
- An irregular hour worker is defined as a worker whose paid hours of work in each pay period during the term of their contract is (under the terms of their contract) wholly or mostly variable. This may, therefore, catch certain agency workers as well as some variable hours workers and zero hours workers.
- A part year worker is defined as a worker who is only required to work part of the year under the terms of their contract and there are periods within that year (during the term of their contract) of at least a week which they are not required to work and are not paid for. This is therefore likely to catch seasonal workers and some term time only workers.
The provisions affecting irregular hours and part year workers only affects any workers after the start of the leave year on or after 1 April 2024.
The 3 Key Changes
A New Method Of Holiday Accrual For These Workers
This stems from confusion following the Supreme Court’s decision in Harpur Trust v Brazel last year which resulted in part year workers having more holiday entitlement than part time workers who worked the same number of hours on an annual basis.
Under the new legislation, employers are permitted to calculate holiday entitlement for irregular hour workers and part year workers as 12.07% of the hours worked in a pay period. This does not affect how holiday entitlement should be calculated for regular hours workers.
Rolled Up Holiday Pay
Rolled-up holiday pay is where employers pay workers a sum in addition to their normal hourly rate of pay to represent their holiday pay entitlement. What this means is that employers will be allowed to pay a “holiday pay enhancement” on top of both irregular hour workers and part year worker’s wages. Rolled up holiday pay will need to be calculated using the worker’s total earnings over the relevant pay period. Again, this does not apply to regular hours workers.
New Method For Calculating Holiday Entitlement For Long Term Sick Leave Or Family Leave
The new legislation will calculate holiday pay entitlement for such both irregular hour workers and part year workers as 12.07 per cent of the hours worked in a pay period, in a bid to level the playing field and create greater transparency. This includes use of a 52-week reference period.
However, the Government has scrapped plans to introduce an overarching 52-week holiday entitlement reference period for all employees and workers.
Conclusion
The Government website has a full page with examples of calculations for the holiday pay changes (hyperlinked). On a practical level, employers should ensure they are reminding workers about the need to use up their holiday entitlement within the holiday year.
Don’t forget, this advice is general in nature and will need to be tailored to any one particular situation. As an RMI member you have access to the RMI Legal advice line, as well as a number of industry experts for your assistance.
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