The start of 2024 has brought new government guidance on holiday pay and entitlement following the changes to the Working Time Regulations 1998 that came into effect on 1 January 2024. The changes will affect rates of holiday pay and holiday entitlement for irregular hours workers and part-year workers, the legality of rolled-up holiday pay and amendments to the rules on the carrying over of leave. Understanding these updates is crucial for employers to ensure compliance with the updated regulations.
Irregular hours and part-year workers
Definitions for both irregular hours workers and part-year workers have been set out in the new regulations. This helps to provide some clarity over who is entitled to what holiday when they have non-standard working patterns – whatever those may be.
An irregular hours worker is someone whose number of paid hours in each pay period is wholly or mostly variable under the terms of their contract. A part-year worker is an individual who is contracted to work only during certain times of the year and there are periods within the year (of at least one week) in which they are not required to work and for which they are not paid. Interestingly, the guidance states that an individual is not a part-year worker if they are paid over 12 months, even if they have periods of more than a week where they do not work.
Holiday entitlement for irregular hours and part-year workers is calculated as 12.07% of actual hours worked in a pay period. If these workers are on maternity or family-related leave or off sick, a calculation method is introduced that involves averaging the hours worked over the 52-week period prior to starting the leave in order to determine the amount of leave that accrued during the absence.
Holiday pay rates
For leave years beginning on or after 1 April 2024, most workers are legally entitled to 5.6 weeks of paid statutory holiday entitlement per year. This entitlement is divided into 4 weeks at “normal” holiday pay and the remaining 1.6 weeks can be paid at the worker’s basic rate of pay, which refers to their basic remuneration.
The government has now specified that the 4 weeks of “normal” holiday pay must include the following:
- payments, including commission payments, intrinsically linked to the performance of tasks which a worker is contractually obliged to carry out;
- payments relating to professional or personal status relating to length of service, seniority or professional qualifications; and
- other payments, such as overtime payments, which have been regularly paid to a worker in the 52 weeks preceding the calculation date.
Rolled-up holiday pay
The guidance recognises that rolled-up holiday pay will be permitted as a method of paying holidays for irregular hours and part-year workers. This practice has technically been unlawful since 2006, but can now be applied for holiday years starting on or after 1 April 2024.
Rolled-up holiday pay allows employers to pay an additional amount in each pay period instead of paying workers when they actually take time off. Under the regulations, rolled-up holiday pay should be calculated as 12.07% of the worker’s normal pay in each pay period. If an employer elects to use this method of paying holidays, it must be clearly stated in the employment contract and the additional amount must be clearly identifiable as holiday pay on all pay slips.
Carrying over leave
The Covid-19 regulations that permitted carrying over leave during a two-year period have been repealed from 1 January 2024, albeit with a short transition period to 31 March.
The new regulations preserve the wider carry-over rights established by previous EU case law and will apply to all workers. The following new rules apply:
- If a worker is unable to take some or all of their statutory holiday entitlement due to maternity or other family-related leave, they can carry forward up to 28 days of their untaken leave into the following leave year.
- If a worker with regular hours throughout the year is unable to take some or all of their statutory holiday entitlement due to sickness, they can carry forward up to 20 days of their untaken leave into the following leave year. However, the leave must be taken by the end of the 18-month period starting from the end of the leave year in which it was accrued.
- Irregular hours workers or part-year workers can carry over up to 28 days of leave in similar circumstances. Similarly, this must be taken by the end of the same 18-month period.
For advice on holiday pay or leave entitlements for your workers, please do not hesitate to contact our Employment team who would be happy to assist.