Graham Irons
Partner, Howes Percival
Do you employ ‘seasonal’ workers or workers on flexible, ever-changing hours? You may be in the leisure or tourism industry, the education sector, or simply employ young workers during the summer holidays. Whatever the reason may be, you should familiarise yourself with the new approach to calculating holiday pay and entitlement for seasonal and irregular hours workers moving forward.
If you’re short on time and don’t fancy reading The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 or the Government’s recent guidance notes (with worked examples), we will try to help by highlighting the key changes you need to get to grips with.
The Regulations took effect on January 1, 2024 (although some of the changes only apply from April 1, 2024). So, what do you need to know?
Irregular hours workers and part-year workers – what do we mean?
- Irregular hours worker – where the number of paid hours worked in each pay period is, under the terms of the employment contract, wholly or mostly variable. Zero-hour, casual workers may fit this definition. If the contract has a rotating shift pattern (i.e. alternating between working 30 hours one week and 15 hours the next), this would not be ‘wholly or mostly variable’ since the hours are still fixed.
- Part-year worker – where a worker is contracted to work only part of the year and there are periods of at least one week in the year where they are not required to work and will not be paid. These are more commonly known as seasonal workers. A worker who is paid an annual salary (instead of by the hour) is unlikely to fit this definition since there are no weeks without pay.
Holiday accrual
For leave years starting on or after April 1, 2024, statutory holiday entitlement for seasonal workers and irregular hours workers will accrue at a rate of 12.07% of actual hours worked in a pay period.
The figure of 12.07% represents the statutory minimum holiday entitlement of 5.6 weeks as a proportion of the working year of 46.4 weeks. If a worker is entitled to additional holiday under their employment contract, the corresponding rate needs to be calculated and applied.
Rolled-up holiday pay
For leave years starting on or after April 1, 2024, it will be lawful to pay ‘rolled-up’ holiday pay to seasonal workers and irregular hours workers (a practice which was ruled out in 2006). This can be done by simply applying a 12.07% uplift to a worker’s normal pay, instead of paying holiday pay when they actually take holiday.
Alternatively, holiday pay for these workers can be calculated based on their average pay over the last 52 weeks worked. In finding these 52 weeks, any weeks where they did not work/receive pay should be excluded, along with any sick leave and maternity or other family-related leave. You only need to look back as far as 104 weeks; if less than 52 weeks were worked over this period, the average should be based on this lower number of weeks worked. If a worker has less than 52 weeks’ service, the average should be based on their total length of service.
Commission and overtime
All workers are entitled to at least 5.6 weeks of paid holiday per year. Four weeks of this entitlement must be paid at a worker’s ‘normal’ rate of pay, which includes:
- payments which are ‘intrinsically linked’ to their contractual duties/tasks, including commission;
- payments relating to length of service (e.g. loyalty bonuses), seniority or professional qualifications; and
- other payments which have been regularly paid in the last 52 weeks, such as overtime
The remaining 1.6 weeks of holiday can be paid at a worker’s basic rate of pay.
What about when workers are on other forms of leave?
When workers are on sick leave, maternity leave or other family- related leave, they continue to accrue holiday.
For leave years starting on or after April 1, 2024, you should apply the same 12.07% accrual rate to a worker’s hours, calculated by:
- Looking at the hours worked in the preceding 52-week period (starting on the day their leave began and going back 52 weeks); and
- Taking an average of the hours worked in a week. Exclude any weeks where they were on leave/off sick at any time but do include any weeks not worked for any other reason. If a worker has less than 52 weeks’ service, the average should be based on their total length of service.
Carryover of leave
If statutory holiday entitlement can’t be taken due to being on sick leave, then seasonal workers and irregular hours workers can carry over up to 28 days (in contrast to 20 days for full-year and regular workers). This carried-over holiday must be used within 18 months of the end of the relevant leave year, otherwise it will be lost. If statutory holiday entitlement can’t be taken due to being on maternity or other family-related leave, then all workers can carry over up to 28 days.
…Simple really!
In all seriousness, if you need advice about calculating holiday pay and entitlement, you can contact Howes Percival’s leading employment team.
To find out more, visit www.howespercival.com or call 01604 230400 and ask to speak to one of our employment experts.
