09 November 2023

Things are changing for irregular hours and part year workers. The Department for Business and Trade (DBT) has responded to the two consultations released this year around holiday pay. So, now that we have had some time to go through the information provided, lets understand how different scenarios should be handled and treated.

Currently the draft regulations propose changes to holiday pay calculations will come into force for leave years starting on or after 1 April 2024.

First, we need to know who these new rules relate to; part-year and irregular hours workers.

The draft regulations provide us with a definition to work from;

Irregular hours worker

In relation to a leave year, if the number of paid hours that they will work in each pay period during the term of their contract in that year is, under the terms of their contract, wholly or mostly variable.

Part-year worker

In relation to a leave year, if, under the terms of their contract, they are required to work only part of that year and there are periods within that year (during the term of the contract) of at least a week which they are not required to work and for which they are not paid.

 

Worker type and situation

Method used

Treatment

Full time or full year worker

Standard

NO CHANGE

Worker receives 5.6 weeks annual leave entitlement.

If earnings fluctuate due to regular overtime, bonus or commission payments, you calculate a 52-week average and pay this when the holiday is taken.

If earnings never change, I.e., for salaried workers, you pay their basic rate of pay when holiday is taken.

Irregular hours or part year worker

 

Worked pay period

Accruing entitlement

Accrue 12.07% of hours worked in each pay period.

Pay is paid as per the 52-week average when the entitlement is exercised.

Irregular hours or part year worker

 

Sick or statutory leave

Accruing entitlement
  1. Calculate the average number of hours worked in the prior 52 weeks, if less than 52 weeks available use that amount.
    1. Discount weeks where the worker was on sick leave or statutory leave.
    2. Include all other weeks, even if no work completed in that week.
    3. If weeks are discounted go back up to 104 weeks to obtain a 52-week average.
  2.  Calculate 12.07% of the hours arrived at in step 1.
  3. Multiply the number of hours by the number of weeks in the pay period relating to sickness or statutory leave.

Irregular hours or part year worker

 

Worked pay period

Rolled-up holiday pay

Pay 12.07% of eligible earnings as an uplift for each pay period.

Entitlement must be used as normal, however, pay will not be given at the time of exercising the entitlement.

Irregular hours or part year worker

 

Sick or statutory leave

Rolled-up holiday pay

Take an average of the holiday pay element paid to the worker in the previous 52 weeks, if less than 52 weeks available use that amount.

Multiply the average by the number of weeks in the pay period relating to sickness or statutory leave.

Information provided in this news article may be subject to change. Please make note of the date of publication to ensure that you are viewing up to date information. 

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