Woodfi nes Solicitors
Holiday pay – understanding the new rules
Workers in the UK are entitled to 5.6 weeks of holiday in every leave year. For people who work fi ve days a week, this means that they are entitled to 28 days of holiday a year. An employer can ask workers to take the eight usual bank holidays out of their holiday allowance. When workers take holiday, they are entitled to a week’s
Andrew Buckley Partner,
Employment Law Woodfi nes Solicitors
pay for a week’s leave. For employees who receive a fi xed salary, it’s easy for employers to know how much to pay a holidaying worker. So far, so easy – but it gets more complicated when workers’ pay fl uctuates depending on factors like bonus, overtime and commission. As a result of cases determined by appellate courts in recent years, a holiday pay calculation will usually involve calculating the worker’s average remuneration over the 52 weeks before the calculation date (or over the number of complete weeks that the worker has been employed – if less than 52 weeks).
What of the situation where a worker works an atypical
working pattern – for example, term-time-only workers? T e Supreme Court had looked at this point in Harpur Trust v Brazel. The Court concluded that ‘part-year’ workers are still entitled to 5.6 weeks of holiday a year, as they accrue holiday whilst they are an employee, rather than simply when they are performing work. Since the holiday calculation has to be based upon the last remunerated 12 weeks (note the reference period was originally 12 weeks but was increased to 52 weeks several years ago) – the practical eff ect is that a term-time-only worker gets the same paid holiday entitlement as someone working a full year. For example – a term-time worker who works 37 weeks a year would get the same holiday entitlement as someone who works 46.4 weeks a year (the legal maximum). Furthermore, where someone is employed on a casual,
temporary or zero-hours basis, the holiday pay rules created problems for employers. T e obvious solution of paying the employees holiday accruing at the rate of 12.07% of the hours worked (5.6 weeks of holiday entitlement / 46.4 working weeks of the year) was technically unlawful because this meant that workers were only accruing holiday when actually working, rather than the whole period that they were employed. Employers would also – often – pay workers their holiday entitlement at the end of any assignment of work. T is arrangement – known as rolled-up holiday pay – was also unlawful (but remained in widespread use by employers). Due to the perceived unfairness of part-year and casual,
or zero hours workers being entitled to proportionately more holiday than permanent workers, the government have amended the holiday pay rules. The percentage approach (i.e. 12.07%), as well as the entitlement to pay atypical workers at the end of any assignment of work, has been put on a formal footing. For holiday years starting on or after April 1, 2024, it will be lawful for employers to both adopt the percentage approach to the calculation of holiday pay, and to pay rolled-up holiday pay at the end of any assignment of work.
Find out more at www.woodfi
nes.co.uk
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