New rules on calculating holidays for irregular hours and part-year workers will soon be introduced, with the aim of ensuring that holidays accrued are proportionate to hours worked. Read on for answers to your key questions on this new development.
Who will be affected?
Irregular hours worker: Someone whose contract states that their working hours are wholly or mostly variable (e.g. a casual worker or an employee on a variable or zero-hours contract).
Part-year worker: Someone whose contract states that there is a period of at least one week (during the term of the contract) which they do not have to work and will not be paid (e.g. term-time worker, seasonal worker). Someone who works part of the year but is paid an annual salary in equal instalments does not qualify as a part-year worker, because there will be no weeks during which they receive no pay.
When will this change affect my business?
The new rules on calculating holidays for irregular hours and part-year workers will apply to new holiday years which begin on or after 1st April 2024, so they will affect different businesses at different times.
If the holiday year started on 1st January, the changes won’t come into effect until 1st January 2025. It’s possible to have different holiday years for different employees, and you could choose to start adopting the changes as early as possible by ensuring that the holiday year for your new variable hours employees starts on 1st April (for existing employees a change to the holiday year would require consultation and agreement).
What are the new holiday entitlement and pay rules?
Time off will accrue at the end of each pay reference period at 12.07% of hours worked during that period. If that amount contains a fraction of an hour, it should be rounded up (if the fraction is 0.5 or more) or down (if the fraction is less than 0.5).
The 12.07% figure is based on the statutory minimum holiday entitlement of 5.6 weeks per year. If the employee is entitled to more than 5.6 weeks off under their contract, the percentage figure will be higher. Time off will continue to accrue during sickness or statutory leave, based on an average of hours worked over the previous 52 weeks.
Pay for each hour of holiday taken will be calculated by dividing the average weekly rate of pay for work done (including commission etc.) over the last 52 weeks, by average hours worked during those weeks. Whole weeks of zero pay, sick leave or family-related leave are excluded
Rolled-up holiday pay is an alternative payment method which will involve adding an extra 12.07% of total pay to earnings each pay day (and ensuring that it is itemised on payslips) instead of paying people when they take time off. It should continue to be paid during sick leave or statutory leave, based on average holiday payments made over the previous 52 weeks.
Whichever method of payment is used, individuals will still be entitled to take the time off that they accrue.
How should I introduce the change in my business?
The new rules can apply from the start of employment for new recruits in holiday years starting on or after 1st April 2024. The process will be different for existing employees, and may require consultation and agreement before changes are implemented (particularly if you wish to introduce rolled-up holiday pay).
It’s also worth bearing in mind that the new rules relate to the legal minimum holiday entitlement and pay, and you can choose not to make a change if your current provision is more generous.
Where can I get further support?
The UK government has published full details of these changes - Holiday pay and entitlement reforms from 1 January 2024 - including examples of holiday entitlement and pay calculations for different scenarios. We will be updating contract and handbook templates in time for the April changes to ensure that they are legally compliant.
If you need any further information or want to discuss how these changes may affect you, please call us on 0345 564 5774 or use the contact us form and we'll be pleased to help or further information can be found on the ACAS website
