On 1st January 2024, new laws were brought into force regarding holiday pay. In the main these aim to clarify the situation for those workers who work irregular hours or for part of the year- so zero hours workers and those who do seasonal or term time work are particularly affected. These changes involve the issues of “rolled up” holiday pay, what holiday pay includes, how it accrues and how it is carried forward.
In terms of what holiday pay should include, the Government has decided to stick with the confusing situation that entitles employees to have 4 weeks holiday paid at their “normal” pay rate which includes regular overtime and commission and a further 1.6 weeks at basic pay only. In essence this will write the EU case law into UK legislation.
The concept of “rolled up” holiday pay will now be allowed in certain circumstances to make clear that a workers holiday is proportionate to the hours they have worked. Rolled up holiday means an employees holiday pay is paid at the same time as their basic pay. This was previously ruled unlawful by the ECJ because it was seen to disincentivise people from taking time off work. The new regulations provide the rolled up holiday will be allowed for holiday years starting from 1st April 2024 if:
1. The worker works part time or irregular hours.
2. The holiday pay is calculated at 12.07% of the pay for the work actually done.
3. It is paid at the same time as a workers basic pay.
4. The payslip sets out clearly the holiday pay.
For employers who need people to work irregular hours this makes calculating the correct holiday pay much simpler. Employers still need to make sure their staff have at least 5.6 weeks off work, the regulations do not mean staff can choose to or be made to work for 52 weeks a year.
Workers can also now carry forward any untaken part of 4 weeks leave if the employer does not either recognise their right to be paid annual leave (e.g. they’re wrongly classed as self employed), or does not give the worker a reasonable chance or encourage them to take leave or doesn’t warn them that they’ll lose their leave entitlement if they don’t used it by the end of the leave year.
These new regulations do not eliminate the risks of someone being incorrectly labelled as self employed and so continuing to accrue leave until their employer recognises they are entitled to it and clearly tells them of their right.
Our advice is to double check holiday pay is being correctly calculated and to check contracts and policies are in line with the new regulations. If you need any help, please contact our employment law specialist and Partner, Gareth Dando, on 01484 558060 or gareth.dando@ramsdens.co.uk.
The above article is for illustrative purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any part of the information given.