On 1 April 2024, changes were made to the way holiday pay is calculated. The changes affect irregular workers and part-year workers.
An irregular worker is someone whose paid number of hours worked in each period is wholly, or mostly, variable. A part-year worker is someone who only works part way through the year, with at least one week where they’re not paid.
Previously, part-year and irregular workers holiday pay was calculated using their average pay from the previous 52 weeks worked (only counting paid weeks), up to a maximum of 104 weeks to account for gaps in working hours.
The UK government announced that for holiday years starting on or after 1 April 2024, part-year and irregular workers’ holiday entitlement will now calculated at 12.07% of their actual hours worked in their pay period. For example:
An irregular worker works 43 hours from 1 April 2024 – 30 April 2024. For this pay period, they would be entitled to 5.19 hours holiday pay (43 hours x 12.07%).
This only applies to workers with holiday years’ beginning 1 April 2024. For example, if the employer’s holiday year runs 1 March 2024 – 28 February 2025, then this rule will not take effect until 1 March 2025.
Employers can also choose to pay their employees holiday pay when they issue their pay each pay period. This is called ‘rolled up holiday pay’. It’s not a mandatory requirement, but it may help employers keep track of holiday entitlements for irregular and part-year workers.
As an employer, if you choose to use the rolled-up holiday pay method, ensure your worker is still taking their 5.6 weeks annual leave entitlement each year. This is important because the worker won’t be paid for this, as they will receive their holiday pay each pay period.
Additionally, this change will allow employees to carry over holiday entitlement after certain types of ‘leave of absence’. The accrued leave must be used within 18 months of the end of the holiday year. This will also limit the number of holidays someone on long term sick leave can accumulate. Any leave accumulated during the Covid-19 pandemic must be used by 31 March 2024.
Any questions about these changes? We’re always happy to answer them. Contact our team: Payroll@ct.me
Author: Gail Patterson, CT: Payroll
