Significant Changes To Holiday Rights And Pay Introduced

Important reforms to employees’ holiday rights and pay have come into force this spring, and it is vital that employers understand how to comply with the new rules according to an employment law specialist with leading south east law firm Furley Page.

The Government has introduced the changes as part of its reforms to a range of employment rights that have developed from years of European and UK case law.

Patrick Glencross, a Senior Associate in Furley Page’s Employment team, said: “These changes were introduced to simplify the rules on holiday entitlement and holiday pay calculations in the Working Time Regulations.

“There are some significant new rules that employers need to be aware of, including new definitions of an ‘irregular hours worker’ (someone whose number of paid hours in each pay period is wholly or mostly variable) and a ‘part-year worker’ (someone who is required to work only part of the year and not paid for the remainder, e.g. term-time employees).”

Other notable changes include:

• a new method to accrue holiday entitlement in hours for irregular hours and part-year workers at a minimum rate of 12.07% of actual hours worked in a pay period
• a new method for calculating holiday entitlement for irregular hours and part-year workers when they are off sick or taking maternity leave or family-related leave
• an option to pay irregular hours and part-year workers ‘rolled-up holiday pay’
• confirmation of the right to carry over holiday into the next holiday year in some circumstances
• confirmation of the requirement to include certain payments, such as regular overtime and commission, in calculating holiday pay for statutory purposes.

Patrick continued: “While the changes provide clarity and simplify some areas, holiday rights remain complex. Calculating annual leave and holiday pay for any employees who work irregular hours can be challenging, so now is a good time for employers to take stock and ensure that their organisation is compliant, as failure to accurately calculate holiday entitlement and pay could constitute a breach of contract.

“Such steps could include identifying which employees are irregular hours workers or part-year workers, reviewing which payments are included in holiday pay calculations, and checking policies, contracts and practices to take account of any changes necessitated by the new rules.

“In addition, adjusting payroll systems to process the accrual of holiday hours, ensuring payslips itemise the element of rolled-up holiday pay, and setting up systems to remind employees to take their holiday in time, will help to ensure employers do not fall foul of the new laws.”

For more information about Furley Page’s employment law services, please email Patrick Glencross pg@furleypage.co.uk or call 01227 763939. You can also follow the firm on X (formerly Twitter) @furleypage and on LinkedIn.