What is changing with Holiday Pay in 2024

This is a guest blog by business partner Rocket PAYE which talks about the changes that will apply to holiday pay from 1st April. 2024 

Holiday entitlement and accrual calculations 

In order to address the uncertainty on holiday accrual and entitlement, which arose as a result of the Harpur Trust v Brazel case, the law will be changed for "irregular hours workers" and "part-year workers", updating the Working Time Regulations1998 (WTR) to include regulations 15B to 15F. These regulations will allow for  holiday for these workers  to accrue based on 12.07% (which represents statutory annual leave entitlement (5.6 weeks) expressed as a percentage of the number of potential working weeks in a year (46.4 weeks)) of the hours worked in the previous pay period. A different percentage accrual rate will need to be used where workers are entitled to more than 5.6 weeks of leave . This will apply only to irregular hours and part year workers, whose leave years begin on or after 1 April 2024.  

Rolled-up holiday 

Prior to the changes to WTR,  under EU case law, the use of rolled-up holiday pay was not permitted, although some businesses in the UK used it. The Harpur Trust v Brazel decision of the Supreme Court held that the method of using 12.07% to calculate accrual for a part- year worker engaged under a contract of employment was not compliant with the law. 

Rolled-up holiday will be permitted for irregular hours and part-year workers only. This development means that employers of those types of workers will have the choice whether to “roll up” holiday pay or not.  

Employers that decide to use this method must uplift pay by at least 12.07% (for statutory minimum holiday, more if the holiday entitlement is more generous) each pay period. They must also include a separate section on the payslip which states how much holiday pay is included.  

Definitions 

To provide clarity for employers as to the application of the law, definitions for two key terms have been added to WTR These are as follows. 

Irregular 

“The number of paid hours they [the worker] will work in each pay period during the term of their contract is, under the terms of the contract, is wholly or mostly variable. 

If worker has more than one contract with the same employer, whether their hours are wholly or mostly variable will be looked at in the round.” 

Part-year 

“Under the terms of their [the worker] 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.”