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New holiday rules for part-year and irregular hours workers begin to take effect from 1st April 2024
Adrian Fryer
The government has created an entirely new system of holiday accrual and holiday pay for part-year workers and irregular hours workers. For holiday years beginning on or after 1st April 2024, their holiday rights will no longer come from Regulation 13 and Regulation 13A Working Time Regulations 1998 as with all other workers. Their rights will be set out in Regulation 15B Working Time Regulations 1998.
A person is 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. A person will be a ‘part-year worker’ if, under the terms of their contract, they are required to work only part of the year and there are periods within that year of at least a week which they are not required to work and for which they are not paid.
It is for the employer to decide whether or not a worker is a part-year or irregular hours worker.
Holiday entitlement accrues for these workers, so they accrue leave to reflect the number of hours worked. For holiday years from 1st April 2024, holiday accrual is now calculated in hours and as if there is one composite pot of leave. It accrues at the end of each pay period at a rate of 12.07% of the hours worked in that pay period. ‘Pay period’ has its ordinary meaning and means, for example, each week if the worker is paid weekly.
Irregular hours workers and part-year workers on sick leave or statutory leave (such as statutory maternity or paternity leave) continue to accrue annual leave whilst they are off, under a new calculation set out in the regulations which works by calculating 12.07% of the average hours worked in the 52 weeks prior to the absence on sick leave or statutory leave (including any weeks where no work was done but excluding any weeks where the worker was on sick leave or statutory leave).
For holiday years starting from 1st April 2024, there are two options in terms of how holiday pay is calculated and paid. Employers can either pay rolled-up holiday pay or they can continue to pay workers when holiday is taken.
Employers will be able to roll up holiday pay for irregular hours or part-year workers as long as:
- their holiday pay is calculated at 12.07% of their pay and is paid at the same time as their ordinary pay; and
- the amount of holiday pay is itemised separately on their payslips.
Payslips must record rolled-up holiday pay: the worker’s payslip must indicate the amount of rolled-up holiday pay that has been paid during the relevant pay period.
During any period of sick leave or statutory leave, any worker who receives rolled-up holiday pay will continue to be paid rolled-up holiday pay, calculated as an average of the rolled-up holiday pay received in the 52 weeks looking back from the date that the sick/statutory leave began.
If a business doesn’t want to adopt rolled-up holiday pay for irregular hours and part-year workers, then they do not have to. In these circumstances, pay for holiday taken is worked out 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 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. It is, administratively, a lot more complex than rolled-up holiday.
The government have now issued their own guidance on these changes (see – Holiday pay and entitlement reforms from 1 January 2024 – GOV.UK (www.gov.uk)) .
Depending on your business’s holiday year, these changes may impact you in April or they may not. As and when they do, you will need to have done the following:
- Work out if you currently engage any part-year or irregular hours workers.
- Decide whether you wish to pay rolled-up holiday pay to any such individuals.
- Undertake all necessary discussions with payroll functions to make sure that your workplace arrangements are ready to administer this new system of accrual and pay.
- Review any holiday policy in place and make all necessary changes to take account of the new arrangements.
- Consider whether it is necessary to issue revised terms and conditions of employment to reflect these changes.