As of January 1, 2024, the UK introduced new regulations on holiday pay and entitlement, aiming to simplify calculations, enhance fairness, and improve transparency. We understand these changes may cause confusion for business owners and managers. In this blog post, we’ll break down the updates and explain what you need to know to ensure compliance.
What Are the 2024 Changes?
In November 2023, the Government introduced several changes to existing holiday pay and leave entitlement regulations, including draft legislation outlining how these changes will be implemented.
Key amendments, effective from April 1, 2024, for holiday years starting on or after this date, include:
- Reintroduction of the 12.07% calculation method for holiday pay for irregular, seasonal, or part-year workers.
- Reinstatement of rolled-up holiday pay for these categories of workers.
- Changes to the carryover rules for unused holiday days.
- Updates to the definition of a week’s pay for calculating holiday pay.
While these changes take effect on April 1, 2024, they only apply to businesses with holiday years starting from that date. For example, companies with a January-to-December leave year will not be affected until January 2025.
These changes represent some of the most significant adjustments to holiday pay regulations in recent years. The option to use rolled-up holiday pay for casual workers is expected to benefit both employers and employees, though some technical aspects may pose new challenges for employers. Staying informed and planning ahead will be essential.
Holiday Entitlement vs Holiday Pay
It’s important to distinguish between holiday entitlement and holiday pay.
- Holiday entitlement refers to the amount of leave an employee is entitled to take each year. The statutory minimum in the UK is 5.6 weeks per year, pro-rata for part-time workers. Employers may offer more leave at their discretion.
- Holiday pay is the amount an employee is paid when taking leave. It should reflect what the employee would earn if they were working, including overtime.
Breaking Down the Holiday Pay Changes
Reintroduction of the 12.07% Method for Irregular and Part-Year Workers
Calculating holiday pay for workers with irregular or part-year schedules can be challenging. The 12.07% method is being reintroduced to address this issue. Importantly, this method is not intended for regularly contracted workers but for those with casual or irregular hours.
Who Are “Irregular Hours” and “Part-Year” Workers?
Under the new legislation, irregular hours workers are those whose contract specifies that their hours will vary each pay period, such as zero-hours contract workers. Part-year workers, on the other hand, work only part of the year with gaps in employment, such as term-time workers.
Calculating Holiday Entitlement for Irregular Hours and Part-Year Workers
Under the new regulations, holiday entitlement for irregular and part-year workers will accrue at 12.07% of the hours worked in the previous pay period. This percentage is used for those entitled to the statutory minimum holiday entitlement.
Why 12.07%?
The 12.07% figure is derived from the statutory holiday entitlement of 5.6 weeks, which is 12.07% of the 46.4 working weeks in a year.
If full-time employees are entitled to additional holiday beyond the statutory amount, this will affect the calculation for irregular and part-year workers, so it’s important to consider this when determining holiday entitlement.
If you would like help with calculating rolled-up holiday pay, please try our: Rolled-up holiday pay calculator for Irregular hours and part-year workers
