On January 1st 2024, the Department of Business and Trade published new guidance on Holiday Pay in a post-Brexit, post-Covid and post-Harpur Trust v Brazel ruling world. It includes changes to holiday pay and entitlement. The new guidance covers:
This was previously criticized by many as being too vague. Plus, given the strain the Harpur Trust v Brazel case gave to those working in HR who were responsible for annual leave calculations it is no surprise the government needed to give this definition some further clarity.
Initially, an irregular hours worker was defined in the 2023 proposed guidance as someone whose paid hours are “wholly or mostly variable”. The new January 2024 publication gives further clarity on this by defining an irregular hours worker, and a part-year worker as below:
Holiday pay and entitlement reforms from 1 January 2024 – GOV.UK (www.gov.uk)
The guidance also offers some useful examples of both irregular hours and part-year workers to help ease the headache those in HR and payroll may face trying to establish if their employees are categorized as such.
As well as clearing up the definitions, the guidance has also offered further clarity on the actual holiday entitlement for those irregular hours and part-year workers.
“For leave years beginning on or after 1 April 2024, there is a new accrual method for irregular hour workers and part-year workers in the first year of employment and beyond. Holiday entitlement for these workers will be calculated as 12.07% of actual hours worked in a pay period.”
*Insert huge sigh of relief here*
Following the notorious Harpur Trust v Brazel ruling this will come as a huge relief to many employers who had been left scratching their heads on not only how to calculate the holiday entitlement but why as in some isolated cases the Harpur ruling seemed completely inequitable.
The guidance also gives some much-needed further detail on calculating leave for the above workers should they leave part way through the year, and calculating entitlements through sick or parental leave such as maternity and paternity.
Holiday pay and entitlement reforms from 1 January 2024 – GOV.UK (www.gov.uk)
Moving to a “post-Covid” time now, the new guidance makes clear the end has come for carrying over leave into the following 2 years due to the pandemic and the impact it had on an employer or employee’s ability to take their annual leave. Workers will still be able to use the leave they accrued prior to 1 January 2024 before or on 31 March 2024.
As of April 1st 2024, rules revert to pre 2020 and an employee can only carry over 8 days of their 28 days into the next holiday year. This needs to be with the agreement of course with the employer.
The guidance stipulates the facts on when this may be possible and outlines that if an employer offers more than the statutory minimum of 28 days of leave, then the employee can carry over the additional leave as well. Again, this must be with the employer’s agreement.
Also confirmed in the publication is the 20 days a worker working “regular hours” can carry over if they are off sick, and the 28 days any worker can carry over as a result of taking a period of maternity or other family-related leave.
Holiday pay and entitlement reforms from 1 January 2024 – GOV.UK (www.gov.uk)
The new regulations confirm some of the EU-derived holiday pay rules will remain in place from January 1st, 2024, including the definition of the two pots (normal and basic) of the 5.6 weeks holiday entitlement:
Holiday pay and entitlement reforms from 1 January 2024 – GOV.UK (www.gov.uk)
The guidance outlines that in the 4 weeks of “normal holiday pay”,calculations from 1st January 2024 must include payments including contractual commissions, payments relating to service or professional qualifications and seniority, and other payments that are regularly paid to a worker in the 52 week period such as overtime.
From the 1st April 2024, the 12.07% accrual method is to be used when calculating holiday pay for part-year or irregular hours workers based on the actual hours they have worked in the previous 52 weeks.
Some would say the biggest surprise was the re-introduction of rolled-up holiday pay after its ban in 2006. As of 1st April 2024, employers can choose to roll up holiday pay for their part-year or irregular hour workers only.
This method would allow employers to pay their employees the holiday pay accrued at the same time the worker is paid for the work they do in each pay period.
“The calculation of holiday pay by employers is 12.07% of a worker’s total pay as 12.07% is the proportion of statutory annual leave in relation to the working weeks of each year, for example, 5.6 weeks of statutory annual leave divided by 46.4 working weeks of the year.”
Included in the explanations are some helpful examples of how to calculate the rolled-up holiday pay, including reference periods.
Employers need to be mindful, that if you want to adopt these methods moving forward, and you do not have the contractual right to do so, you will need to review your employment contracts, consult with existing employees to get their agreement, and seek expert employment law advice before making any changes.
Employers will need to review and update their company policies as well as update your payroll. At HPC, we can help, guide and advise you through each step.
To find out more information or if you require any advice about the holiday pay and entitlement changes in 2024, get in contact with our team of experts.
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