The Government has created an entirely new system of holiday accrual and holiday pay for part-year and irregular hours workers. Their holiday rights will no longer come from Regulation 13 and Regulation 13A Working Time Regulations 1998. Instead, their rights are set out in Regulation 15B Working Time Regulations 1998.

The dramatic changes to holiday accrual and pay for these workers take effect for holiday years commencing on or after 1 April 2024. The Government’s guidance on these changes can be found here.

So what is a part-year or irregular hours worker? Let’s start with the definitions…

Irregular hours worker: this status applies if the number of paid hours worked in    each pay period during the contract term in that year is, under the contract terms, wholly or mostly variable. This will capture zero-hours workers.

Part-year worker: this status applies if the contract terms require work for only part of the year and there are periods within that year of at least a week when no work is required and no payment made.  This will include term-time workers and some seasonal workers.

It is up to the employer to decide whether or not an individual is a part-year or irregular hours worker. If they get it wrong and the worker is not a part-year or irregular hours worker, then their holiday entitlement should have been accruing and paid in accordance with the old rules under Regulation 13 and 13A. These do not allow for rolled-up holiday accrual or pay.

Holiday Accrual

There is a new accrual system for part-year and irregular hours workers so they accrue leave to reflect the number of hours worked. For holiday years from 1 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’ is not defined in the new rules but the Government guidance confirms that it has its ordinary meaning –  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 maternity or paternity leave — continue to accrue annual leave while they are off under a new calculation. This works by calculating 12.07% of the average hours worked in the 52 weeks prior to the absence on sick or statutory leave. This includes any weeks where no work was done but excludes any weeks where the worker was on sick leave or statutory leave.

The new accrual system gets around the problematic Supreme Court decision in Brazel v Harpur Trust which decided that part-year workers engaged under permanent or continuous contracts must receive at least 5.6 weeks paid holiday a year, even if they only worked for part of that year.

Rolled-up Holiday Pay

In terms of pay, employers with holiday years from 1 April 2024 have a choice under the new regulations. They 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…

  • Holiday pay is calculated at 12.07% of their pay and is paid at the same time as their ordinary pay; and
  • The holiday pay amount is itemised separately on their payslips.

Payslips must record rolled-up holiday pay and indicate the amount paid during the relevant pay period.

During any period of sick or statutory leave, any worker who receives rolled-up holiday pay will continue to be paid this. It must be calculated as an average of the rolled-up holiday pay received in the 52 weeks preceding the date sick/statutory leave began.

If a business doesn’t want to adopt rolled-up holiday pay for irregular hours and part-year workers, there is no obligation to do so. In these circumstances the worker accrues holiday entitlement in exactly the same way as those receiving rolled-up holiday pay (at a rate of 12.07% of hours worked in the preceding pay period) but the worker is only paid for this accrued leave at the point it is actually taken. Pay for holiday taken in this way is worked out by taking an average of hourly pay received during the 52 weeks prior to holiday being taken. This excludes all weeks where no work was done and any weeks of absence on statutory 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 and is unlikely to be an attractive option for most businesses.

What steps should employers take?

As and when these changes impact your organisation, you will need to do the following:

  • work out if you currently have any part-year or irregular hours workers
  • decide whether you wish to pay rolled-up holiday pay to the relevant individuals
  • discuss it within your organisation to make sure that your payroll systems are ready to administer this new system of accrual and pay
  • review your holiday policy and make all the necessary changes to take account of the new system
  • consider whether you need to issue revised terms and conditions of employment to reflect these changes

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