PayPacket Welcomes Fairness in Holiday Pay for Part-Time and Irregular Hours Employees

The government has announced draft legislation to reform holiday pay for part-time and irregular hours workers in an effort to simplify the calculation for irregular hours and part-year employees. These changes will effect any holiday year commencing on or after 1^st April 2024. 

How to calculate and administer holiday pay has raised challenges and concerns for employers for a number of years. The law has been in flux with employers at risk of discovering they are in breach of the law as a result of case law developments, which deviated from common practice in respect of holiday entitlement for atypical workers.

Some of the uncertainties will hopefully be resolved when the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 come into force. 

Some of the changes coming into effect are employee-friendly codifications of existing case law, whereas others present opportunities for employers. 

These changes are particularly important to understand if you have employees with a typical working patterns or have not updated your holiday pay policies to deal with case law developments that are now being codified.

Key changes include:

• ‘Rolled Up’ Holiday Pay: As well as simplifying calculations, ‘rolled-up’ holiday pay will be allowed for part-time workers and those who work irregular hours, enabling employers to include an amount for holiday pay on top of the hourly rate in regular pay packets. 
• Clarity: There will be a clearer definition of what is to be included in “normal remuneration” for the purposes of calculating holiday pay for Working Time Directive holiday entitlement
• Accrual Method Re-Introduced: An annual leave accrual method of 12.07% of hours worked for irregular hours and part-year workers will be re-introduced in a bid to level the playing field and create greater transparency. 
• Carry Over of Annual Leave: EU case law permitting carry-over of annual leave where the worker has been on maternity / family-related leave or sick leave will be restated in UK law
• Express Carry-Forward Provisions: These will be introduced to cover situations such as where an employer fails to give a worker a reasonable opportunity to take holiday in a leave year.

Please insert link to further information if necessary here: https://www.gov.uk/holiday-entitlement-rights/holiday-pay-the-basics