Important holiday pay update
There are important upcoming changes in the holiday entitlement landscape, specifically affecting part-year and irregular hours workers.
This will be relevant to you if you have workers who work varying hours or part of the year only. This is particularly common in the hospitality and education sector.
The Government has recently consulted on proposals to reform holiday entitlements for part-year workers. This was in response to the Supreme Court’s ruling in the Brazel case of last year.
Here’s a brief overview of the upcoming changes:
- Accrual Method: We will see the introduction of an accrual method to calculate holiday entitlement for part-year, irregular hours workers, and agency workers at 12.07% of hours worked in a pay period.
- Calculation Timing: Holiday entitlement should now be calculated at the end of each pay period rather than monthly, as initially proposed.
- Legal Definition: To provide clarity for employers, there will be a legal definition of ‘irregular hours and part-year workers’.
- Rolled-Up Holiday Pay: A new option will be introduced, allowing the payment of rolled-up holiday pay at the statutory rate of 12.07% – only for irregular hours workers, part-year workers, and specific agency workers. This means that, for those workers, holiday pay can be integrated into a worker’s standard pay at the time of work, rather than during their holiday period.
It’s important to note that the draft regulations are scheduled to come into effect on January 1, 2024. The changes will impact part-year and irregular hours workers’ holiday entitlements for leave years beginning on or after April 1, 2024. Until then, part-year and irregular hours workers remain entitled to 5.6 weeks’ unreduced statutory holiday.
What should employers do for now?
Employers should take this opportunity to review how they deal with holiday pay for these groups of workers and consider any amendments required to their processes to give effect to these changes when they come into force.
We will provide timely updates on any additional developments relating to this issue and can also work with you to discuss how you may be affected, liaising with our colleagues in VWV if required.
