Holiday Pay and Entitlement Reforms from 1 January 2024: A Detailed Guide for Employers

The government has introduced new reforms to holiday pay and entitlement regulations that came into effect on 1 January 2024. These changes are designed to simplify the process for calculating holiday pay and entitlement for all workers, including those with irregular hours or who work part-year.

This blog post will provide a comprehensive overview of the new regulations, with a focus on the key changes that employers need to be aware of. We will also provide practical examples to illustrate how the new rules work in practice.

Calculating holiday entitlement for irregular hours workers

One of the most significant changes introduced by the new regulations is the way in which holiday entitlement is calculated for workers with irregular hours. Previously, it was often difficult to calculate how much holiday these workers were entitled to, as their hours could vary from week to week.

Under the new rules, irregular hours workers are entitled to 5.6 weeks of holiday per year. This is the same as the entitlement for full-time workers. However, the way in which this entitlement is accrued is different.

For irregular hours workers, holiday entitlement is accrued on a pro rata basis throughout the year. This means that they will accrue holiday pay for each hour they work. The amount of holiday pay they accrue will be based on their average hourly pay.

Example:

Let’s say an irregular hours worker works an average of 20 hours per week. Their average hourly pay is £10. Under the new regulations, they would accrue 1.12 hours of holiday pay for each hour they work. This means that they would accrue 22.4 hours of holiday pay per week (20 hours x 1.12).

Over the course of a year, they would accrue a total of 1148.8 hours of holiday pay (22.4 hours x 52 weeks). This is equivalent to 5.6 weeks of holiday pay at their average hourly rate of £10 (£1148.80 / £10).

Calculating holiday entitlement for part-year workers

The new regulations also make changes to the way in which holiday entitlement is calculated for part-year workers. Previously, part-year workers were only entitled to holiday pay if they worked for a certain number of qualifying weeks in a year.

Under the new rules, all part-year workers are entitled to 5.6 weeks of holiday per year, regardless of how many hours they work or how many weeks they work in a year. However, the way in which their holiday entitlement is accrued is different to that of full-time and irregular hours workers.

For part-year workers, holiday entitlement is accrued as a proportion of their reference pay. Their reference pay is calculated by taking their average weekly earnings over the previous 52 weeks.

Example:

Let’s say a part-year worker works 20 hours per week for 30 weeks of the year. Their average hourly pay is £10. Their reference pay would be £200 per week (20 hours x £10).

Under the new regulations, they would accrue 0.112 weeks of holiday pay for each week they work. This means that they would accrue 3.36 weeks of holiday pay over the course of their 30-week contract (30 weeks x 0.112).

This is equivalent to 672 hours of holiday pay (3.36 weeks x 200 hours/week).

Carryover of leave

The new regulations also introduce a new right for workers to carry over up to 28 days’ leave if they are unable to take it all in the current leave year. This is a significant change from the previous rules, which only allowed workers to carry over up to 5 days’ leave.

To be eligible to carry over leave, a worker must have:

• Not taken all of their entitlement in the current leave year
• Had a reason for not taking their leave, such as sickness or because their employer refused to allow them to take it

Workers who wish to carry over leave must make a request to their employer. The employer can agree to the request or refuse it. If the employer refuses the request, they must give the worker a written reason for doing so.

Key takeaways for employers

The new holiday pay and entitlement reforms are designed to make it easier for employers to calculate holiday pay and entitlement for their workers. However, there are some key changes that employers need to be aware of:

• All workers are now entitled to 5.6 weeks of holiday per year, regardless of their working hours or pattern.
• Irregular hours workers and part-year workers accrue holiday pay in different ways to full-time workers.
• Workers can now carry over up to 28 days’ leave to the next leave year under certain circumstances.
• Employers need to review their existing holiday pay policies and procedures to ensure they comply with the new regulations.
• The government has published guidance to help employers implement the new regulations.

This is just a brief overview of the new regulations. For more detailed information, please refer to the government’s guidance or seek advice from a qualified employment lawyer.

Additional Resources:

• Government guidance on holiday pay and entitlement: https://www.gov.uk/calculate-your-holiday-entitlement
• Acas guidance on calculating holiday pay: https://www.acas.org.uk/checking-holiday-entitlement/calculating-holiday-pay