Holiday Pay update!

The government has announced a reform of holiday pay calculation for part-time and irregular hours workers, which will come into effect from January 2024. As well as making it easier to work out holiday pay, it will be permitted to have ‘rolled up’ holiday pay for part-time workers and those who work irregular hours, enabling employers to include an amount for holiday pay on top of the hourly rate in regular pay.

There have been ongoing consultations regarding existing EU employment law and holiday pay and it is now hoped that concerns regarding the calculation and payment of holiday entitlement will be addressed, making it clearer for all irregular hours workers, including part-year workers and agency workers. The new legislation will calculate holiday pay entitlement for such workers as 12.07% of the hours worked in a pay period, in a bid to level the playing field and create greater transparency. This is referred to a “rolled-up holiday pay” and will be permitted only for these irregular hour workers. Effectively, employers pay the 12.07% as a sum in addition to an employee’s normal hourly rate of pay to represent their holiday pay entitlement. Up until now this has been an unlawful practice as a result of concerns that workers may not be incentivised to physically take holiday leave. However, under this new reform, rolled-up holiday pay be permitted for part-time workers, irregular hours workers and some agency workers. 

Should you have any questions on the contractual clauses relating to holiday entitlement, please call one of our qualified CIPD consultants on 0800 9995 121 to discuss further.

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