Holiday Pay Guidance from the Government – The Bitesized Edition

Authored by DAS

The Government has issued guidance on calculating holiday pay to simplify holiday entitlement for irregular hours and part-year workers. Here is a summary of that guidance.

Defining irregular hours

Irregular hours workers are those whose number of paid hours they work in each pay period during the term of their contract in that year is wholly or mostly variable.

A part-year worker are those who are required to work only part of the leave year and within that year are not required to work for at least a week for which they are not paid for.

Calculating statutory holiday entitlement

Holiday entitlement for irregular hours workers and part-year works will be calculated as 12.07% of actual hours worked in the pay period.

The 12.07% is based on the fact all workers are entitled to 5.5 weeks. A worker’s total working weeks in a year is 46.4; 12.07% of 46.4 is 5.6.

Normal remuneration

Normal remuneration for the purposes of the 4 weeks of normal holiday entitlement must include:

1. Payments (including commission) that are intrinsically linked to the performance of tasks which a worker is contractually obliged to carry out;
2. Payments relating to professional or personal status relating to length of service, seniority or professional qualifications; and
3. Other payments such as overtime which have been regularly paid to the work over the 52 weeks preceding the holiday calculation date.

Rolled-up holiday

Employers will be allowed to include an additional amount with every payslip to cover a worker’s holiday pay, instead of paying the holiday when a worker takes annual leave.

The calculation will be based on 12.07% of the worker’s total pay in a pay period.

A pay period is the period the worker is paid i.e. weekly or monthly paid.

Holiday pay

For irregular hours and part-year workers employers must calculate a worker’s pay based on their average weekly pay over a 52-week reference period preceding the holiday calculation date. If a worker has not worked for one of those weeks the employer should skip that week however it should not go back any more than 104 weeks.

The above came into force on 1 January 2024 however will only apply to leave years beginning on or after 1 April 2024.

It will be important for employers who employ irregular hours or part-year workers to review the way they calculate holiday currently and start making steps to make any changes to comply with this newly issued guidance.