We are sharing this update from ACCA, our professional body, for the interest of clients and contacts. The content is (c) ACCA

Employers will welcome publication of new government guidance on holiday pay laws for ‘part-year’ and ‘irregular-hours’ workers

Following on from the earlier announcement, new guidance is contained in Guidance: Holiday pay and entitlement reforms from 1 January 2024. There are also adjustments to the existing government guidance ‘Holiday entitlement’. The changes aim to help employers comply with new laws that came into force on 1 January 2024.

The new laws make significant changes. They clarify that paying rolled-up holiday pay at 12.07% is lawful for part year and irregular hours workers, superseding a recent Supreme Court ruling that stopped the practice. They also alter the definition of a week’s pay for holiday pay paid to irregular hours and part-year workers (and holiday pay paid to any other worker for the first four weeks of their statutory holiday – the remaining 1.6 weeks continue to be calculated as before) so that it includes ‘normal remuneration’, including elements such as:

  • commission payments intrinsically linked to performance of tasks which are obligatory under their contracts
  • payments for professional/personal standing, given length of service, seniority or professional qualifications
  • overtime and like payments, regularly paid in the 52 weeks before the calculation date.

The guidance confirms that it is still lawful (despite previous doubts arising from the UK’s departure from the EU) for workers to carry all statutory annual leave to the following year if they are unable to take their leave in a year because they are on family-related leave. Workers can also carry their four weeks per year annual leave forward for up to 18 months if they have been unable to take such leave because of sickness or where their employer:

  • has refused to pay them their entitlement
  • has not given them a reasonable opportunity to take leave and encouraged them to do so
  • has failed to tell them that leave not taken before the end of the leave year, and which cannot be carried over, will be lost.

However, the guidance does not clarify all issues and uncertainties. For example, the guidance does not completely clarify which categories of worker are within the definitions of ‘irregular hours workers’ and ‘part year workers’. Another question is what amounts to sufficient ‘encouragement’ from an employer.

Employers should read the guidance on the GOV.UK website, consider whether there are irregular or part-year workers, identity what amounts to normal remuneration, and decide whether to offer rolled-up pay or stick with current holiday pay arrangements.

Employers should review policies, procedures and contracts accordingly, train relevant staff and communicate the changes to the workforce.

Our suite of employment factsheets can be a useful tool for employers to ensure their policies, procedures and staff contracts are up to date.

See our previous article for more information and links to additional guidance.