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On 1 January the government introduced changes to the Working Time Regulations under which workers (that’s workers or employees) are entitled to a minimum of 5.6 weeks’ paid holiday each year. Although note that some of the reforms only apply to leave years commencing on or after 1 April this year.
The changes affected those working irregular hours (where the number of paid hours that they will work in each pay period during their contract in that year is wholly or mostly variable. For example, a shift worker who works a rotating shift and a different number of hours each week) and part-year workers (where under the terms of their contract they are only required to work part of that year. For example, a farm worker who works seasonally).
Holiday Entitlement
For workers who are not working irregular hours or part-year workers the method for calculating how the statutory holiday entitlement accrues does not change. It will be 1/12th on the first day of each month for the first year and thereafter prorated based on the proportion of a week that they are contracted to work.
What will change for those working irregular hours or part year workers is how the entitlement should be calculated for leave years on or after 1 April 2024. Now you will need to calculate the holiday entitlement as 12.07% of actual hours worked in the pay period.
12.07% is used as this is based on the fact that all workers are entitled to 5.6 weeks’ leave, so work 46.4 weeks and 12.07% of 46.4 is 5.6.
Note that if the worker is entitled to more than the statutory minimum leave you will need to work out the relevant percentage to use to calculate their holiday entitlement. The government guidance walks you through an example of this: Guidance
The Guidance also takes you through how to calculate entitlement for workers on maternity leave or other family related leave or sick leave.
Carry over of leave
From 1 January 2024 the following rules will apply:
- Workers can usually carry over a maximum of 8 days of leave into the next year with employer consent.
- Employees with more than 28 days of leave may carry over additional unused days with employer permission, subject to company policies.
- Those unable to take statutory holiday due to maternity or family leave can carry forward up to 28 days into the following year.
- Sick leave affecting holiday entitlement allows workers (with regular hours) to carry over up to 20 days, to be used within 18 months, paid at their normal rate.
- Irregular or part-year workers can carry over up to 28 days within the same 18-month period.
- Workers on maternity or family leave can carry over all unused leave to the next year.
- Employers must allow carryover if they’ve denied leave recognition or failed to inform workers about unused leave.
- Regular hour workers may carry over up to 20 days for such reasons, while irregular hour or part-year workers can carry over their full entitlement.
The Guidance does also emphasise that holiday should be taken in the relevant holiday year where it can be so that workers get the rest intended by the Regulations.
What to pay?
From 1 January 2024 of the 5.6 weeks of pair statutory holiday, 4 weeks must include the following ‘regular payments’:
- 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
- other payments, such as overtime payments, which have been regularly paid to a worker in the 52 weeks preceding the calculation date
Whether bonuses are included in normal holiday pay will be determined by the nature of the bonus.
Workers with regular hours and fixed pay must receive the same holiday pay as the pay they would receive if they were at work and working.
Most contracts do not state which leave will be used first; the 4 weeks or the remaining 1.6 weeks of the statutory minimum allowance. If different amounts are to be paid for these two sections of leave entitlement then the contract should address this.
For leave years beginning on or after 1 April 2024, part-year and irregular hours workers are legally entitled up to a maximum amount of 5.6 weeks of paid statutory holiday entitlement per year, calculated according to actual hours worked using the 12.07% accrual method. If their employer chooses to use rolled-up holiday pay, then the entire amount of their leave for irregular hours and part-year workers will be paid at the ‘normal’ rate of pay.
Rolled up holiday
For leave years starting on or after 1 April 2024 employers will be allowed to use rolled up holiday pay as an additional method of calculating holiday pay for irregular hour and part-year workers only. Employers will want to check what the worker’s contract say about this as to introduce the concept of rolling up holiday could amount to a change in terms and conditions which will need to be agreed with the worker. Again, the Guidance sets out various examples as to how rolled up holiday should be calculated.
What to do if this affects your business?
If you are getting to grips with this change because you do have irregular hour or part-year workers I your business, what should you do first? These first 5 steps should help you on your way:
- Identify if you employ part-year or irregular hours workers
- Determine if you’ll offer rolled-up holiday pay to these employees
- Coordinate with payroll to implement the new leave accrual and payment system
- Review and update holiday policies to align with the new regulations
- Assess if revised terms and conditions of employment are necessary to reflect the changes
Please do also get in touch if you have any questions about these new changes and how to apply them in your business.
E: help@jma-hrlegal.co.uk / T: +44 (0)1252 821792
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