Holiday pay in 2024 – the new rules
Sponsored feature | Andrew Buckley, partner, Woodfines Solicitors
Workers in the UK are entitled to 5.6 weeks of holiday in every leave year. For people who work five days a week, this means that they are entitled to 28 days of holiday a year. An employer can ask workers to take the eight usual bank holidays out of their holiday allowance.
When workers take holiday they are entitled to a week’s pay for a week’s leave. For employees who receive a fixed salary, it’s easy for employers to know how much to pay a holidaying worker. So far, so easy – but it gets more complicated when workers’ pay fluctuates depending on factors like bonus, overtime and commission.
As a result of cases determined by appellate courts in recent years, a holiday pay calculation will usually involve calculating the workers average remuneration over the 52 weeks before the calculation date (or over the number of complete weeks that the worker has been employed – if less than 52 weeks).
What of the situation where a worker works an atypical working pattern – for example term-time only workers? The Supreme Court had looked at this point in Harpur Trust v Brazel. The court concluded that ‘part-year’ workers are still entitled to 5.6 weeks of holiday a year, as they accrue holiday whilst they are an employee, rather than simply when they are performing work. Since the holiday calculation has to be based upon the last remunerated 12 weeks (note the reference period was originally 12 weeks but was increased to 52 weeks several years ago), the practical effect is that a term-time only worker gets the same paid holiday entitlement as someone working a full year. For example, a term-time worker who works 37 weeks a year would get the same holiday entitlement as someone who works 46.4 weeks a year (the legal maximum).
Furthermore, where someone is employed on a casual, temporary or zero-hours basis, the holiday pay rules created problems for employers. The obvious solution of paying the employees holiday accruing at the rate of 12.07 per cent of the hours worked (5.6 weeks of holiday entitlement/46.4 working weeks of the year) was technically unlawful because this meant that workers were only accruing holiday when actually working, rather than the whole period that they were employed. Employers would also – often – pay workers their holiday entitlement at the end of any assignment of work. This arrangement, known as rolled-up holiday pay, was also unlawful (but remained in widespread use by employers).
Due to the perceived unfairness of part-year and casual, or zero hours, workers being entitled to proportionately more holiday than permanent workers, the government has amended the holiday pay rules. The percentage approach (ie 12.07 per cent) as well as the entitlement to pay atypical workers at the end of any assignment of work has been put on a formal footing.
For holiday years starting on or after 1 April, 2024, it will be lawful for employers to both adopt the percentage approach to the calculation of holiday pay, and to pay rolled-up holiday pay at the end of any assignment of work.
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