Almost everyone classed as a ‘worker’ — a definition going wider than just employees — is legally entitled to 5.6 weeks’ paid holiday each year. This includes workers with irregular hours and part-year workers.
From April 2024, new rules will change how holiday pay is calculated for workers, including an accrual method based on hours worked and the option for employers to use rolled-up holiday pay (RHP). Understanding these changes is crucial for both workers and employers to ensure compliance and fair treatment. Nottingham chartered accountants, Clayton & Brewill, provides further detail.
What are irregular hours and part-year workers?
Irregular hour workers are individuals who work wholly or mostly variable hours in each pay period. This can refer to those on a zero-hour contract or bank workers, but is not applicable to individuals who work on rotating shift patterns.
Part-year workers are, as expected, individuals who are only required to work for part of the year. To be classified as a part-year worker, the worker should have periods within the term of their contract of a least a week where they are not required to work and are not paid for this unworked period. This definition could refer to workers such as teachers and teaching assistants, as they typically only work during school term times and are not paid for school holidays.
New holiday pay rules
For leave years beginning on or after 1 April 2024, new rules apply to these workers. The government has provided an insight into the holiday pay these workers are to receive. Some points to note are:
- There is an accrual method to calculate statutory holiday entitlement for these workers: this is calculated as 12.07% of actual hours worked in a pay period. The 12.07% figure is based on the statutory minimum holiday entitlement, but workers may be entitled to more than the minimum, depending on their contract. Annual leave entitlement is capped at 28 days.
- A method to work out how much leave such workers have accrued when they take maternity or family related leave, or are off sick.
- The option for employers to use rolled-up holiday pay (RHP) to calculate holiday pay for these workers. This means employers can choose whether to use RHP, or the pre-existing 52-week reference period method.
What is RHP?
RHP occurs when an employer spreads holiday pay over the year, by including an additional amount with every payslip to cover holiday pay rather than paying holiday pay when the worker takes annual leave.
The use of RHP isn’t something workers can request, it is at the employer’s discretion, and can be applied to irregular hours and part year workers only, for leave years starting on or after 1 April 2024.
Employers using RHP must:
- Calculate the pay at a rate of at least 12.07% of the workers total pay in a pay period
- Pay it at the same time they pay for the work the worker has done within that pay period
- Show it as a separate payment on the worker’s payslip
It is important to note that RHP is in addition to the worker’s normal payment, which should be at or above minimum wage.
How we can help
Changes to payroll can be complicated and time consuming for your business. The team at Clayton & Brewill is always happy to offer extra support or take on your payroll needs so you can focus on building your business.
For further payroll support or to discuss what these holiday changes mean for you, please get in touch with our friendly team today on 0115 950 3044 or by email.
