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New holiday pay rules: a new regime for part-year and irregular hours workers

Adrian Fryer

Adrian Fryer

We are about to enter a brave new world in terms of holiday entitlement for those who have irregular or part-year working patterns. The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (the New Regulations) have created two new types of workers whose holiday entitlement and pay will not stem from Regulation 13 or Regulation 13A Working Time Regulations 1998 in the future. ‘Irregular hours workers’ and ‘part-year workers’ will be assessed under new provisions on calculation and entitlement, which will be introduced into the Working Time Regulations 1998 as Regulation 15B-F and 16A.

A worker will be considered an irregular hours worker if the number of paid hours that they will work in each pay period during the term of their contract in that year is, under the terms of their contract, wholly or mostly variable. This will capture zero-hours workers.

A worker will be a part-year worker if, under the terms of their contract, they are required to work only part of the year and if there are periods within that year of at least a week in which they are not required to work and for which they are not paid.  This will include term time workers and some seasonal workers.

For holiday years beginning on or after 1 April 2024, irregular hours and part-year workers will accrue holiday at a rate of 12.07% of hours worked in the preceding pay period. Pay period is not defined in the New Regulations but it is assumed that the term has its ordinary meaning – i.e. a week if the worker is paid weekly, a month if the worker is paid monthly.

Employers have the option of paying rolled-up holiday pay to part-year and irregular hours workers. This involves making a payment of 12.07% of their pay at the same time as their ordinary pay and itemising this amount as holiday pay separately on their payslips.

If an employer chooses not to pay rolled-up holiday pay to its part-year or irregular hours workers, then holiday pay will be paid at the point that the leave is taken and will be calculated by taking an average of hourly pay received during the 52 weeks prior to holiday being taken, excluding all weeks where no work was done and any weeks of absence on statutory (family) leave or sick leave (and looking back to earlier worked weeks to count towards 52 in these cases). This calculation would need to be re-done each time a worker took a period of holiday.

This new regime for part-year and irregular hours workers is not without problems. For example, the New Regulations state that holiday is only accrued at the end of each pay period – what happens at the end of the holiday year? The holiday accrued in the final month will be lost before it can be physically taken unless carry-over applies. The New Regulations also state that the maximum amount of holiday that irregular hours and part-year workers can accrue is 28 days, but their holiday entitlement is calculated in hours – how can employers know what a ‘day’ is? No doubt this and other issues will be looked at by the tribunal in test cases over the course of 2024.

Contact our Employment Team.