Calculating annual leave and holiday pay for employees can be challenging, particularly for those who work irregular hours. The government has this year introduced significant changes to simplify the rules on holiday rights as part of its reforms to a range of employment rights that have developed from years of European and UK case law.
Employees and other workers can bring tribunal claims under the Working Time Regulations 1998, including for unlawful deductions where their employer has failed to pay or underpaid holiday pay. As such, employers need to be aware of these regulations if they employ staff who work irregular hours, or only work during specific parts of the year.
The new regulations apply to casual and irregular hours workers, whose number of paid hours in each pay period is wholly or mostly variable, and part-year or term-time workers, who are required to work only part of the year, and have other periods during the year when they are not required to work and for which they are not paid.
These workers will now accrue holiday entitlement at the rate of 12.07% of actual hours worked in a pay period. The percentage will be higher if they are entitled to more than the statutory minimum annual leave. Specific rules apply for calculating holiday entitlement when they are off sick, or taking maternity leave or family-related leave.
Employers now have the option to pay these workers rolled-up holiday pay, which is an additional sum for holiday as an uplift of 12.07% to their normal pay, instead of making payments when they take leave and having to calculate their average pay.
Qualifying workers will also have the right to carry over holiday into the next holiday year if it has not been possible for them to take it due to sickness or family-friendly leave, if they are denied the right to take it, or they were not told that they would lose their holiday if they did not take it before the end of the holiday year.
The new regulations apply in relation to holiday years starting on or after 1 April. It is an opportune time, therefore, for employers to ensure that their business is compliant with this legislation, for example by identifying which employees are irregular hours workers or part-year workers, checking which payments are included in holiday pay calculations, and deciding whether to use rolled-up holiday pay. Implementation of this option may involve changes to employment contracts, which may require the business to obtain the worker’s agreement.
Patrick Glencross is a senior associate at Furley Page
