2024 employment reforms: new guidance on holiday pay rules
The government last week has issued new detailed guidance on the changes to the rules regarding holiday pay and entitlement which came into force on 1st January 2024.
The law in relation to paid holiday can be complicated. Following a flurry of recent case law, the most notable of which was the decision in Harpur Trust v Brazel, the Government launched a consultation on the way the law in this area works. The result of this consultation is a set of new regulations which change the law on holiday.
These changes came into force on 1st January but apply only to holiday years which begin on or after 1st April 2024. Until such time as this happens, the previous legislation and case law will apply. The new regulations will only apply to England, Scotland, and Wales - not Northern Ireland.
An ‘irregular hours worker’ is someone whose number of hours worked in their pay period (the period in between receiving payments of salary) is ‘wholly or mostly variable’ under the terms of their contract.
A ‘part-year worker’ is someone who, under their contractual terms of employment, will only work for part of the year and will therefore have periods in that time where they do not work and are not paid.
The new regulations only make changes in respect of this category of worker. The law regarding holiday pay and accrual will not change for workers who are not either an ’irregular hours’ or ’part-year’ worker.
Under the new rules for these two types of workers, holiday pay will now be calculated in hours and not days and weeks.
Holiday pay will accrue at a set rate of 12.07% of the hours the individual works during the relevant pay period. Such holiday will continue to accrue during any period of family leave, holiday or sickness absence.
To calculate the accrued leave during that time, a 52-week reference period will be used to calculate an average of the hours that would have been worked (and therefore the relevant holiday accrual).
Where this method of accrual is utilised, you can choose to pay the relevant holiday pay to the workers in a rolled-up fashion. This is done by paying the equivalent 12.07% of all pay for work done in the relevant pay period as an uplift on top of the payment of salary.
This may require a change to the individual’s contractual terms and should be paid as a separate element on the individual’s payslip.
The government has issued guidance on holiday pay and entitlement reforms from the 1st January 2024.
Use of this guidance is not a substitute for receiving full advice as this area of law is very fact sensitive. Many employers will also want to review their existing practices to see how they may be able to accommodate the changes.
Get in touch with our employment law team today for expert advice on how to navigate these upcoming changes.
Contact Tom to discuss this further.
