Changes to Holiday pay and Entitlement

The title of this blog is more than likely to provoke a groan from many employers who have been grappling with recent case law that has been changing the way holiday is accrued, calculated, and paid.

It started with Lock v British Gas Trading Ltd, continued with Bear Scotland Ltd v. Fulton and more recently reached a head with the case of Harpur Trust v Brazel all of which prompted Government, with effect from 1st April 2024, to introduce further amendments to the Working Time Regulations 1998.

Accrual At 12.07%
For leave years that begin on or after 1st April 2024, irregular hour workers and part-year workers who are not on maternity/family related leave or sick will accrue holiday at a rate of 12.07% of hours worker per pay period. This may sound familiar and is essentially a reinstatement of the method many employers used to calculate holiday pay before the Harpur Trust v Brazel decision.

However, the regulations state a reference period of 52 weeks should be used to calculate holiday entitlement where the worker is on a maternity/family related leave or sickness absence. The 52 weeks used should not include any weeks where the worker was on maternity/family leave or off sick. If there are not 52 weeks of information, the period is shortened to the number of weeks the worker has worked for the employer.

Rolled Up Holiday Pay
Amendments to The Working Time Regulations 1998 make it clear that rolled up holiday pay can be paid to irregular workers and part-year workers for leave years beginning on or after 1st April 2024 provided the contract of employment allows for this or the worker agrees.

Before these changes took effect, holiday pay should have been calculated by using the worker’s average pay from the previous 52 weeks (counting only weeks in which they were paid).

Other Types Of Workers
For workers who are not irregular hours or part-year workers, the method of accruing holiday remains the same.

Whilst the regulations are intended by Government to provide clarity on annual leave, it is understandable that yet another change may be difficult to get to grips with. If this is the case, please do not hesitate to call our legal advice helpline.