By Tina Smitherman MCIPPDip & Debbie Wilson ACIPP at MFW Sittingbourne
As you may be aware, new legislation has recently been passed regarding how holiday is accrued and paid for workers whose hours are irregular or those workers who work part of the year only. This will only apply to leave years that start on or after 1 April 2024. Please note that for workers with regular working patterns or contracted hours, the current rules remain in place.
Consequently, before 1 April 2024 (or when your holiday year begins if later), you may need to re-assess your workforce to ascertain those workers who fit into that category. For ease, you will find the definition of these workers under point 2 of this link:
Prior to 1 April 2024, holiday accrual should remain as it is currently and pay should be based on an average of the past 52 weeks of normal pay, taking into consideration regular overtime, commission, additional payments etc. However, from the 1April 2024 holiday year, employers can choose use this new method if they wish to do so.
What is the new method?
Holiday entitlement for irregular or part year workers can be calculated as 12.07% of the actual hours worked in a pay period.
For example, you have a worker works irregular hours and is paid monthly, their leave year also starts on 1 April 2024 and they are entitled to the statutory minimum holiday entitlement only (5.6 weeks). In July 2024, the worker worked 75 hours and so in order to work out how much holiday is accrued in July, you would calculate 12.07% of the 75 hours. This would equate to 9 hours.
If your company offer more than the statutory entitlement of leave or you have a part year worker, you may need to adjust the 12.07% accordingly.
Rolled-up holiday pay
For leave years starting on or after 1 April 2024, employers will be allowed to use rolled-up holiday pay as a method for calculating holiday pay for irregular or part year workers instead of paying holiday pay at the time the leave is taken. Employers using this method should calculate the holiday pay based on the workers total pay in the pay period.
Employers should also ensure that they check their workers’ contact in case this creates a variation of the contractual agreement and employers must inform their workers that they intend to use this method for paying holiday pay. The holiday pay should be paid at the same time the worker is paid for the time worked each period, be clearly shown on the workers’ payslip and be in addition to the worker’s normal salary (which should be at National Minimum Wage or above).
Employers who do not wish to use rolled-up holiday pay, can continue to use the current 52-week reference period to calculate holiday pay.
If a worker is on sick, maternity or other family related leave and rolled-up holiday pay is used, the rolled-up holiday pay should be calculated using an average of the worker’s earnings in the 52-week relevant period.
Additional information regarding holiday pay and accrual can be found on the link mentioned earlier as well as at the following links: