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How is holiday pay changing?

Employers can now legally 'roll up' holiday pay into the basic rate of pay for irregular hours and part-year workers -

We asked employment lawyers to explain the changes to holiday pay and entitlement which came into effect on 1 April 2024.

Entitlements for ‘irregular’ or part-year workers

There is a new accrual method for irregular-hour workers and part-year workers which means that holiday entitlement will be calculated as 12.07% of actual hours worked in a pay period.

Claire Brook, employment law partner at legal firm Aaron and Partners, said the move is designed to make holiday entitlement fairer across part-year and full-time workers.

This follows the Harpur Trust vs Brazel case. In the case, the Supreme Court ruled that employees who only work for part of the year (e.g. term-time workers) are entitled to 5.6 weeks of holiday pay, like employees that work all year round. 

Speaking to HR magazine, she said: “Following consultation, the government has taken steps to change the method of calculating holiday entitlement for irregular or part-year workers, after a Supreme Court decision left concerns that some irregular or part-year workers would receive more holiday than regular-hours or full-year workers. 

“Government guidance has set out the specific steps for calculation: first, divide the hours worked in a pay period by 100. Multiply that answer by 12.07, and then round up or down to the nearest hour.”

Read more: Employment law updates for 2024

Rolled-up holiday pay for irregular-hours and part-year workers

Employers can now legally 'roll up' holiday pay into the basic rate of pay for work done for irregular-hours and part-year workers only. 

Brook said it would be important to communicate to staff if planning to move to rolled-up holiday pay: “If you are seeking to make a change to terms and conditions, seek voluntary agreement to the proposals. Once agreed, it is imperative that updated contracts of employment/variation of contract letters are signed by both parties, clearly explaining how and when holiday pay is calculated and paid, and that the rolled up pay is shown as a separate item on payslips.

“Where employers seek to enforce changes to contractual terms, it is important that they go through an appropriate consultation process and offer contractual notice in advance. Advice should be sought at the planning stage.”


Carrying over leave

Legal changes mean that employees can carry over leave if they were unable to take holiday due to family leave or sickness absence.

Emma Thompson, head of employment at Thackray Williams, told HR magazine: “There is a new express right to carry over leave that is untaken due to maternity and other family-related leave, sick leave, and circumstances where a business has either denied the employee a right to paid leave or failed to ensure that they have a reasonable opportunity to take it.”

Brook added that holiday may be carried over where the employer fails to recognise a worker's right to annual leave, fails to give the worker a reasonable opportunity to take leave or fails to tell them that leave not taken will be lost.

She said: “In such cases, the worker has the right to carry over any statutory untaken leave or leave which has been taken but was unpaid. The right will last until the end of the first full leave year in which there is no such failure by the employer.”

Read more: Companies making it hard for workers to take holiday