Changes to holiday pay and entitlement

The Government has published updated guidance on holiday pay and entitlement for part-year and irregular hours.

By way of reminder, for any holiday years starting from 1 April 2024 onwards, employers will have the option to calculate holiday pay and entitlement in two new ways for part-year and irregular hours workers (as defined in the statute):

• A new method of calculating annual leave based on an accrual method, calculated at 12.07 per cent of hours worked in a pay period.
• Rolled up holiday pay (the practice of including an amount for holiday pay on top of a worker’s normal hourly rate, paid at the time they perform the work, rather than when they are on holiday).
  
  

The updated guidance on calculating holiday entitlement and pay for part-year and irregular hours workers can be found here. This was updated on 1 April 2024. The main change is that in the original version, the guidance included the example of “Ian”, which suggested that workers whose pay was annualised (ie paid in 12 equal monthly instalments) would not satisfy the new definition of part-year worker in the legislation because there were no weeks where he did not receive pay. This example was unhelpful for many schools who annualise pay both for administrative convenience, and because staff prefer a regular monthly income.

In the latest version of the guidance, the Government has removed this example and instead included a paragraph which suggests it may be possible for someone to qualify as a part-year worker if they are paid “during” periods they are not working, provided that there is no expectation for them to work in that period and they are not paid “for” that period. Although this change does not alter the underlying law in any way, it does provide scope for those engaged for part of the year but paid annualised pay to come within the statutory definition of part-year worker.

For more information, see our Holiday reforms Q&A as referred to in the previous School Report.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, April 2024