New government guidance on Holiday Pay

The Government has introduced reforms with the aim of simplifying holiday entitlement and pay calculations in the Working Time Regulations (WTR).

These changes came into force on 1st January 2024 and cover:

• The definition of irregular-hours workers and part-year workers in relation to the introduction of the holiday entitlement accrual method and rolled-up holiday pay.
• The introduction of a method to calculate statutory holiday entitlement for irregular-hour and part-year workers.
• The introduction of a method to determine how much leave an irregular-hour or part-year worker has accrued when taking time off for maternity/family related leave or sickness.
• The removal of the Working Time (Coronavirus)(Amendment) Regulations 2020.
• Keeping the current rates of holiday pay where 4 weeks is paid at the normal rate of pay and 1.6 weeks paid at the basic rate of pay – keeping the 2 distinct pots of leave separate.
• Defining what is classified as ‘normal remuneration’ in relation to the 4 weeks of statutory annual leave.
• The introduction of rolled-up holiday pay as another method for calculating holiday pay for irregular-hours workers and part-year workers – read more about this in our article here

Definition of an irregular-hour worker and a part-year worker

A clear definition has been developed in relation to the following:

• Irregular-hours worker – a worker will fall under this category if the number of hours they work in each pay period during their contractual term is variable under the terms of their contract.
• Part-year worker – a worker will be covered by this definition if they are only required to work part of that year or there are periods during the year that they aren’t required to work and which they are not paid for and this is specified in their contract.

The new method for calculating statutory holiday entitlement for irregular-hour and part-year workers

In the first year of a workers’ employment, they will receive one twelfth of the statutory entitlement on the first day of each month. After they have worked for more than a year they will get holiday entitlement based upon their statutory and contractual entitlement. This is what we know as ‘pro-rata’.

For leave years beginning on or after the 1 April 2024, holiday entitlement for workers will be calculated as 12.07% of actual hours worked in a pay period.

The 2 ‘distinct’ pots

All full year workers, except those who are self-employed, are entitled to 5.6 weeks of paid statutory holiday entitlement per year. 4 weeks are paid at the ‘normal’ rate of pay and 1.6 weeks at ‘basic’ pay.

The Government had indicated previously that they may amalgamate this into one type of leave but has since decided against this. For more information on this please read our article on the Government’s response to consultations on holiday pay, TUPE and annual leave entitlement for atypical workers.

The changes to what constitutes normal pay in relation to 4 weeks of statutory annual leave

As of 1 January 2024, the following payments must be included in the 4 weeks of normal remuneration in relation to statutory annual leave:

• payments, including commission payments, relating to the performance of duties that a worker is contractually bound to complete.
• payments linked to professional or personal status with regard to length of service, seniority, or professional qualifications.
• other payments, like overtime payments, which have been regularly paid to a worker in the 52 weeks leading up to the calculation date.

For more information and advice on the above, please feel free to reach out to the Employment Team at Wilson Browne Solicitors or call 0800 088 6004