At Jack Ross, we know the value of hard work includes the reward of your holiday entitlements. On 1 January 2024, the government introduced several changes to the Working Time Regulations. Every worker is entitled to the equivalent of 5.6 weeks paid holiday. Additional time off may be promised in individual contracts, known as contractual holiday entitlement. Any disputes around this should involve legal advice.
The government’s overall aim in changing these regulations is to simplify the system and clarify specific points of contention, reducing discrepancies in holiday pay calculations.
This easy-to-follow guide explains the changes to the Working Time Regulations that came into force on 1 January 2024.
If you have any questions about these changes or need our expert payroll and accounting services, please use the contact form on the right. A member of our team will contact you to arrange a free 15-minute consultation.
Holiday Pay and Entitlement Reforms
Irregular Hours Worker Definition
The government has properly defined an irregular hours worker. Examples of contracts that fit this definition include a ‘casual’ contract and a zero-hours contract.
An ‘irregular hours worker’ is someone whose work schedule varies significantly. This variation means the number of hours they work can change from one pay period to the next throughout their contract year. Whether an employee gets paid weekly, monthly, or by any other frequency, they fall into this category if their work hours are mostly unpredictable.
Employers should document these varying patterns clearly in the worker’s contract to avoid confusion.
Part-Year Worker Definition
A ‘part-year worker’ is an employee who is contracted to work only during certain times of the year, not the whole year round. This means there are specific weeks, at least a week-long, where they do not work and thus do not get paid. An example would be teaching assistants who work only during the school term and are not required or paid outside of these terms. Whether their weekly hours are fixed or vary, if they are only working and earning for part of the year, they are considered part-year workers.
Understanding Holiday Entitlement Changes for Different Types of Workers
For employees with a consistent work schedule throughout the year, known as non-irregular hours or non-part-year workers, there is no change in how they accrue holiday entitlement. In their first year of work, they gain holiday entitlement gradually, receiving one-twelfth of their total annual entitlement at the start of each month. From their second year onwards, their holiday entitlement is calculated based on the number of hours or days they work weekly, a process called ‘pro-rating’.
However, for irregular hours and part-year workers, how holiday entitlement is calculated will remain the same for leave years starting before 1 April 2024. You can still use the existing method or the online holiday entitlement calculator to determine their holiday leave.
Starting from leave years on or after 1 April 2024, there is a new way to calculate holiday for irregular hours and part-year workers. From their first year of employment onwards, their holiday entitlement will be based on 12.07% of their actual hours in each pay period. This new method ensures that holiday entitlement is more accurately reflected by their work hours.
Why is Holiday Entitlement Calculated as 12.07%?
The 12.07% calculation comes from everyone’s right to 5.6 weeks of holiday each year. If we have 52 weeks in a year and take away the 5.6 weeks for holiday, we are left with 46.4 weeks that a person might work. Calculating 12.07% of these 46.4 working weeks gives 5.6 weeks of holiday time.
Remember, the 5.6 weeks is the minimum holiday time everyone gets. If an irregular hour or part-year worker’s contract says they get more holiday than this, they are entitled to more than the 12.07% figure calculated.
Holiday Entitlement When Leaving a Job Mid-Year
If someone leaves their job before the leave year ends, it is important to calculate their holiday entitlement to make sure they have received the minimum amount of holiday time they are allowed. If they have not taken all their entitled holiday, they should be paid for the days they did not take.
Calculating Holiday for Fixed Weekly Hours with Varied Daily Hours
For workers with fixed weekly hours but different hours each day, the law does not specify precisely how to apply the 28-day limit when figuring out their yearly holiday entitlement. The government believes a fair approach is to consider the 28-day limit equal to 28 of the worker’s average working days.
The average working day is defined as:
Average working day = hours worked per week ÷ days worked per week.
Accruing Holiday During Maternity or Family Leave and Sick Leave
Irregular hours and part-year workers continue to build up their holiday entitlement if they are on maternity leave, other family-related leave, or off sick. The type of leave they can take depends on their job status.
Family-related leave covers maternity, paternity, shared parental, and adoption leave. Workers accrue holidays during these times, just like when they are working. However, you cannot use annual leave while on maternity leave. For other family leaves, it is possible to split the time between work and leave, using annual leave in between.
How to Calculate Holiday for Leave and Sick Days
When figuring out holiday entitlement for someone taking maternity, family-related, or sick leave, look at their work hours from the last 52 weeks, starting the day before their leave begins. When calculating their average work hours, do not count any weeks they were on maternity or family leave or sick. But, those weeks should be included if they missed work for other reasons. If they have not been with the employer for 52 weeks yet, use the weeks they have worked to make the calculation.
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New Rules for Carrying Over Annual Leave from 1 January 2024
From 1 January 2024, here is what you need to know about carrying over annual leave:
Standard Rule: Workers can carry over up to 8 days of leave to the next year, if their employer agrees.
More Than 28 Days: If a worker has over 28 days of leave and does not take all of it, they might be able to carry over the extra days. To understand the specifics, it is best to check the employment contract or company policies.
Maternity or Family Leave: Workers on maternity or other family-related leave can carry over up to 28 days of unused leave to the next year if they cannot take it because of their leave.
Sickness: Regular full-year workers who could not take their holiday due to sickness can carry over up to 20 days. This carried-over leave must be used within 18 months from the end of the accrued leave year. This leave should be paid at the normal rate.
Irregular Hours or Part-Year Workers: These workers can also carry over up to 28 days of leave under the same sickness conditions, with the 18-month usage rule applying.
Mandatory Carry Over: Employers must allow workers who could not take their holiday because they were on maternity or other family-related leave to carry over their full holiday entitlement to the next year.
Changes to Carrying Over Leave Due to Coronavirus
Before, if workers could not take their holiday because of coronavirus, they could move unused days to the next two years. But starting from 1 January 2024, this will not be possible anymore. Workers can still use any leave they saved up because of COVID-19 before 1 January 2024, as long as they do it by 31 March 2024.
If someone leaves their job by 31 March 2024 and they have not been able to use all their holiday due to coronavirus, they can get paid for these unused days.
Simplifying Holiday Pay Calculations from 1 January 2024
Starting from 1 January 2024, the way ‘normal’ holiday pay is calculated will change, with new regulations defining what must be included:
What to Include in Holiday Pay:
- Any payments directly linked to the work tasks a worker must do as part of their contract, like commissions.
- Payments that reflect the worker’s professional status, such as those based on how long they have worked there, their seniority, or their qualifications.
- Regularly received payments, like overtime, based on the last 52 weeks before calculating holiday pay.
For Regular Workers with Fixed Pay:
Workers on a fixed salary will get the same amount of money for a week of holiday as they would if they were working.
For Part-Year and Irregular Hours Workers (from 1 April 2024):
- These workers are entitled to up to 5.6 weeks of paid holiday each year. This is calculated based on the actual hours they work, using the 12.07% accrual method or rolled-up holiday pay.
- With rolled-up holiday pay, the total holiday pay is included in the regular pay checks. Employers might also choose the traditional method, looking back at the worker’s pay over the past 52 weeks to calculate holiday pay.
- Both ways ensure that holiday pay reflects what the worker typically earns, whether their schedule is consistent or varies.