24 June 2024

New Holiday Pay Regulations Effective January 2024

The Government introduced regulations in January 2024 which included a new definition of a week’s pay for holiday pay calculations, reintroduced the 12.07% of hours worked calculation method for irregular hours and part-time workers, and the introduction of rolled-up holiday pay for such workers.

Holiday pay calculation

Statutory holiday leave equates to 5.6 weeks per holiday year. This is made up of 4 weeks leave based on EU law and 1.6 weeks based on UK law. When working out the level of holiday pay for the 4 weeks component, employers need to factor in and include commission, some bonuses and overtime that has been paid to the worker in the 52 weeks before the calculation date.

Holiday accrual for irregular-hours and part-year workers

There is no change to how statutory holiday entitlement accrues for workers who do not work irregular or part-year. However for those who do, the position changed effective as of April 2024.

For leave years beginning on or after 1 April 2024, holiday entitlement needs to be based on 12.07% of actual hours worked in a pay period. This means that irregular hour workers and part time workers build up holiday entitlement as they work and not a whole year’s holiday entitlement up front at the start of a holiday year.

So employers will be able to choose from two systems of holiday pay for irregular hour workers or part-year workers. These are:

– pay holiday pay when holiday is taken, calculated at the rate of a week’s pay for each week’s holiday. A week’s pay is generally the average amount of weekly pay over the previous 52 weeks. A week’s holiday will consist of the average number of hours worked in each week of the same period; or

– choose to pay rolled-up holiday pay under the new regulations, which will be an uplift of 12.07% to the worker’s renumeration for work done in each pay period. This means that the holiday pay is calculated in reference to the actual hours worked by the worker in the pay period. An average over a 52-week reference period should be used to calculate the amount of holiday accrued during a period of sick leave or statutory leave (such as maternity leave).

This means that it may now be simpler to use the second option with regard to calculating holiday pay. But employers who wish to use this new option will only be able to do so when the leave year starts after 1 April 2024 meaning for many practically this would be 1 January 2025.

An example of this calculation is as follows:

An employee works irregular hours, is paid monthly and is entitled to statutory minimum holiday only. Their leave year started on 1 April 2024 . They worked 90 hours last month so their leave entitlement for last month will be 12.07% of 90 hours which is 11 hours (rounded up to the nearest hour).

Rolled up holiday

Rolled up holiday is a reference to paying a worker’s holiday pay at the same time as basic pay. The new law has confirmed that this is allowed. Whilst holiday pay can be paid in this way, this does not mean that a worker can work the whole year. Instead any holiday will be technically unpaid as they will have already been paid for this.

Carry over of leave

Case law has already established that workers who are unable to use holiday entitlement due to sickness or family leave are entitled to roll this over to the next holiday leave period. However now this is set out in law.

This confirms that workers are entitled to carry forward all their 5.6 weeks’ statutory leave entitlement into the next holiday year if they can’t take it due to family leave or up to 4 weeks of leave if they are unable to take it due to sickness.

The new law also provides that workers can carry over untaken holiday it an employer has not given them reasonable opportunity to use it in a holiday year or encouraged them to use it.

Rate changes

As of 1 April 2024

– The national living wage (for workers aged 21 and over) has increased from £10.42 per hour to £11.44 per hour.

– The standard minimum wage rate for younger workers (aged 18 to 20) has risen from £7.49 to £8.60 per hour.

As of 6 April 2024

– Compensation for unfair dismissal has increased to the lower of £115,115 and one year’s pay.

– The limit on a week’s pay used for calculating statutory redundancy pay (and the unfair dismissal basic award) has increased to £700. So statutory redundancy payments are now a maximum of £21,000.

As of 8 April 2024

– Statutory maternity, adoption, paternity, shared parental and parental bereavement pay has increased from £172.48 to £184.03 per week.

– Statutory sick pay has risen to £116.75 per week.

For further clarification, call 01328 863231 and ask to speak to our employment law team.