We are often asked how is holiday pay calculated. Holiday pay can be a complicated area and some recent changes are being made in 2024, which we summarise below.

New changes to employees’ holiday pay and entitlement

Changes are being made in 2024 to employees’ holiday pay and entitlement under the Working Time Regulations.

The government aims to simplify holiday pay and entitlement, in particular for part-year and irregular hours workers.

What are the changes to holiday pay and entitlement in 2024?

Changes are being introduced during the course of 2024, with those already in force including:

• A definition of part-year and irregular hours workers
• The inclusion of additional regular payments, such as commission and overtime in weekly pay calculations for holiday purposes
• A reduction in the amount of unused holiday that can be carried over, following a relaxation of the rules during the pandemic

Changes due to come into force in April 2024 include:

• Holiday entitlement for part-year and irregular hours workers is to be calculated in hours rather than weeks
• Help with calculating holiday pay and entitlement for part-year and irregular hours workers during long absences
• The option for employers to pay holiday pay along with ordinary pay, known as rolled-up pay, for part-year and irregular hours workers

Part-year workers and irregular hours workers defined

Part-year workers are defined as workers whose employment contracts only require them to work part of the year, with periods of at least one week during which they do not work and are not paid.

Irregular hours workers are contracted to work hours that are wholly or mostly variable during each pay period.

Weekly pay calculations for holiday purposes

Full-year workers are entitled to 5.6 weeks of paid holiday each year. This equates to 28 days for someone working a 5-day week.

Employers must include all ‘normal’ pay in the first four weeks of this holiday pay and for all irregular hours and part-year workers’ pay.

Normal pay refers to payments that a worker regularly receives, including:

• Commission linked to ordinary job performance
• Payments relating to length of service or professional qualifications
• Regular overtime paid in the preceding year

For full-year workers, the remaining 1.6 weeks of holiday pay can be paid at a basic rate. Your employer may choose to pay all holiday pay at the normal rate. If they do not, they should tell you which type of holiday pay you will receive first so that you know how much to expect.

New holiday carry-over rules

Holiday not taken because of the pandemic can no longer be accrued. Holiday accrued prior to 1 January 2024 must be taken on or before 31 March 2024.

Calculating holiday entitlement for irregular hours and part-year workers

As from 1 April 2024, irregular hours workers and part-year workers are entitled to up to 5.6 weeks of paid holiday per year. The amount is calculated based on hours worked and they are entitled to 12.07% of the hours worked in paid holiday. This equates to 5.6 weeks for full-time workers.

Calculating holiday pay for irregular hours and part-year workers who are absent

If an irregular hours worker or part-year worker is absent for a lengthy period, for example, because of long-term illness, employers must calculate their holiday entitlement based on the 52 weeks worked prior to their last day of work.

The option of rolled-up pay

From 1 April 2024, employers can choose to ‘roll-up’ the holiday pay of irregular hours and part-year workers with their ordinary pay. This means that a proportion of holiday pay will be included on every payslip rather than being paid at the time that the holiday is taken.

It must be paid in the pay period in which the holiday has accrued and be an increase in pay of 12.07%. Regular bonuses, commission and overtime should be included when calculating the figure, which must be based on the total earnings for the pay period.

For more information, see our Working Time Regulations and Holiday Rights page.

Contact our employment lawyers for holiday entitlement and holiday pay

Working out your holiday pay and entitlement can be complicated. If you are concerned that you are not receiving the pay or the holiday that you are due, our employer lawyers can check whether this is the case and represent you in securing any back payments owed to you.

Disclaimer:

This blog is for information purposes only. Nothing should be relied upon as a substitute for legal advice and nothing written should be construed as legal advice or perceived as creating a lawyer-client relationship.