Changes to the Working Time Regulations – calculating holiday pay and entitlement. What do they mean for you?
On 1 January 2024 the Government issued guidance in relation to changes to the Working Time Regulations which aimed to simplify holiday pay and entitlement calculations. These reforms mainly apply to irregular hours and part year workers, which are defined below – if you’re unsure if the changes applies to your employees, check your contracts and contact us for help if needed.
Irregular hours worker – worker whose number of paid hours that they will work in each pay period during the term of their contract in that year is, under the terms of their contract, wholly or mostly variable. E.g. Casual (Zero hours) workers whose contract states that they work a different number of hours per week. Does not apply to employees who are on rotating shift patterns where their hours are fixed.
Part-year worker – worker who is required to work only part of the particular year and there are periods within that year of at least a week which they are not required to work and for which they are not paid. Includes part year workers who may have fixed hours. E.g. Teaching Assistants who work term time only and are paid only when working. Does not apply to employees on annualised hours contracts as their contracts state that there are weeks that they would not be working BUT there are no weeks that they are not being paid as their salary is paid over 12 months.
Whilst the guidance is designed to simplify things, it can still be a challenge to understand if and how it applies to you and your business. Our HR experts have highlighted the main areas that you, as employers, should be aware of below.
How to calculate statutory holiday entitlement for irregular hours and part year workers
For holiday years that commence on or after 1 April 2024, this will be accrued as 12.07% of the actual hours worked in the pay period defined in the individual’s contract (if the employee is entitled to 5.6 weeks of statutory leave per year. It will be a higher percentage if they are entitled to more than 5.6 leave due to their working days)
How to work out how much leave an irregular hour or part-year worker has accrued when they take maternity or family related leave or are off sick:
Irregular hours workers and part year workers continue to accrue annual leave during periods of maternity leave, family leave or sickness.
For leave years commencing on or after 1 April 2024, the employer should count back over the previous 52 weeks as a reference period, and use an average of hours worked to calculate how much leave has been accrued during a period of absence described above.
Details on how to make these calculations can be found in section 5 of the Government Guidance Document along with key considerations for the employer, and we’re here to help you too. Just give us a call on 01794 329470 or use our contact form and we can make the necessary calculations for you.
We can provide HR advice on a pay as you go basis – so if you have a query, get in touch.
How to define ‘normal remuneration’ in relation to 4 weeks of statutory annual leave
All full-year workers are legally entitled to 5.6 weeks of paid statutory holiday entitlement per year. Four weeks of this entitlement must be paid at a worker’s ‘normal’ rate of pay (including regular payments, such as overtime, regular bonuses and commission). The remaining 1.6 weeks’ entitlement can be paid at ‘basic’ rate of pay, that is, the worker’s basic remuneration.
From 1 January 2024, workers with regular hours and fixed pay must receive the same holiday pay as the pay they would receive if they were at work and working.
When calculating pay in the 4 weeks of normal holiday pay the following should be included:
• payments, including commission payments, that relate to the performance of tasks which a worker is contractually obliged to carry out.
• payments relating to professional or personal status relating to length of service, seniority or professional qualifications.
• other payments, such as overtime payments, which have been regularly paid to a worker in the 52 weeks preceding the calculation date.
When employers calculate holiday pay for leave years that commence on or after 1 April 2024, for part-year and irregular hours workers, they can choose to use rolled-up holiday pay method (equating to 12.07%) if they wish to. Or they can continue to use the existing method by which they consider the previous 52 weeks that have been worked by an individual to work out holiday pay.
More information about this as well as calculation methods can also be found in the Government’s Guidance Document.
Other areas of note in the Guidance around holiday pay and entitlement in the updated Working Time Directive include:
1) clarification around arrangements for carry over of leave for regular hours workers, irregular hours workers and part year workers
2) removal possibility for workers to accrue COVID carryover leave as was previously the case.
3) confirmation of how to calculate leave entitlement when an individual leaves a job part-way through a leave year.
4) a method for calculating statutory leave entitlement when an individual work a fixed number of hours per week but work different hours each day.
5) details of how to calculate pay in lieu of unused holidays for irregular hours or part year workers who leave part way through a holiday year.
For further guidance on these changes to the Working Time Regulations affecting holiday pay and leave entitlement, get in touch here.
