Government introduces holiday pay and entitlement reforms

holiday pay calculationsThe UK government has implemented reforms to simplify holiday pay calculations and entitlement as per the Working Time Regulations.

These changes include the definition of irregular hours and part-year workers in relation to the introduction of the holiday entitlement accrual method and rolled-up holiday pay, the introduction of a method to calculate statutory holiday entitlement for irregular hours and part-year staff, and how much leave an irregular hour or part-year worker has accrued when they take maternity or family-related leave or are off sick.

It has also removed the Working Time (Coronavirus) (Amendment) Regulations 2020, which affect the accrual of Covid-19 carryover leave and has maintained the current rates of holiday pay where four weeks is paid at normal rate and 1.6 weeks paid at basic rate while retaining the two different types of leave.

Furthermore, the government has defined what is considered normal remuneration in relation to the four weeks of statutory annual leave and has introduced rolled-up holiday pay as an alternative method to calculate holiday pay for irregular hours workers and part-year workers. Rolled-up holiday pay should be calculated based on an employee’s total pay in a period.

Some reforms will only apply to annual leave years beginning on or after 1 April. These include the methods to calculate statutory holiday entitlement and how much leave an irregular hour or part-year worker has accrued on maternity or family-related leave or when off sick, as well as the new rolled-up holiday pay calculations.

A Department for Business and Trade spokesperson said: “The guidance focuses on the legal minimum entitlement of 5.6 weeks’ paid holiday. Many workers will have contracts entitling them to additional paid holiday beyond the statutory minimum. This additional holiday is known as contractual holiday entitlement. Individual contracts should be checked first, and if necessary, independent legal advice sought.”