Currently, employees have two separate holiday entitlements:
- four weeks’ leave based on EU law; and
- an extra 1.6 weeks’ leave based purely on UK law.
The 4 weeks’ leave must be paid at ‘normal’ pay, which means including regular overtime and commission in the calculation. In contrast, the additional 1.6 weeks’ leave can be paid at basic pay only.
The new regulations came into force on 1 January 2024 and will change holiday laws for part year and irregular hours workers.
These new rules do not apply to workers with regular hours who continue to accrue at 1/12th of the 5.6 weeks entitlement for each month or part-month
Accrual system
For holiday years that start from 1 April 2024, irregular hours and part-year workers will accrue annual leave entitlement on the last day of each pay period at the rate of 12.07% of the number of hours that they have worked during that pay period. This is subject to a maximum of 28 days per year.
The new approach means that irregular hours workers and part year workers will build up holiday entitlement as they work, rather than getting a whole year’s holiday entitlement up front at the beginning of the year. Their entitlement will stay in proportion to hours worked.
Rolled-up holiday pay
This means paying an employee’s holiday pay at the same time as basic pay.
Rolled-up holiday pay will be allowed for holiday years from 1 April 2024, as long as:
- the worker counts as an irregular hours or part-year worker;
- holiday pay is calculated at 12.07% of all pay for work done;
- the holiday pay is paid at the same time as pay for the work done; and
- the holiday pay is itemised separately on the payslip.
This approach will not be mandatory, but this may help you if you are struggling with how to calculate holiday entitlement and pay for workers whose hours are irregular or occasional.
The new system means that you can manage holidays by simply paying an extra 12.07% pay supplement. When the worker takes holiday, they do not get paid extra holiday pay.
However, something that needs to be taken into consideration with rolled up holiday pay is that it doesn’t mean that workers can start working 52 weeks of the year, without taking any leave. The onus is still on the employer to make sure they have at least 5.6 weeks off. The only difference is that, when they do take that time off, it would be unpaid as holiday pay has been accounted for in the rolled up holiday pay supplement.
