Updates to annual leave and holiday pay for atypical or part-time workers

Solicitor Aoife McGrath, in leading Thames Valley law firm Blandy & Blandy’s Employment Law team, explains the recent changes.

The Supreme Court’s decision in Harpur Trust v Brazel in 2022 raised concerns as to the fairness of holiday calculations for workers on atypical working patterns as some part-time workers were perceived to be receiving more holiday entitlement than their regular-hours counterparts.

As a result, the Government has introduced a new method of calculating holiday for atypical or part-time workers under a new regulation 15B of the Working Time Regulations 1998. This new regulation stipulates that holiday for such workers is calculated in hours rather than weeks at a rate of 12.07% of the actual hours worked in a particular pay period (e.g. weekly or monthly).

The 12.07% figure noted is based on the statutory holiday entitlement of 5.6 weeks’ holiday per year – 5.6 weeks divided by the 46.4 remaining weeks of the year. If a worker is entitled to more than 5.6 weeks’ holiday per their contract, the relevant figure will then be a percentage of the worker’s full holiday entitlement divided by the remaining working weeks in the holiday year.

Under the new regulation, employers can choose between two different methods of holiday pay.

1 - The employer can either pay the holiday pay when the worker actually takes a holiday. If the worker takes a week’s holiday, that will use up the same number of hours holiday as the employee works on average in a week. The average weekly hours worked are calculated by taking the average of hours the worker has worked over the previous 52 weeks.

2 - Alternatively, the employer may decide to pay rolled-up holiday pay. This had previously been found to be technically unlawful, even if it remained relatively common practice. Rolled-up holiday pay is calculated at the rate of 12.07% of the worker’s pay for work completed in each pay period. Such workers must still be allowed to take their accrued holiday, but are paid when the hours are worked and the holiday is accrued, rather than when they take the holiday.
The new regulation applies to holiday years starting on or after 1 April 2024. This will mean that the change may take some time to take effect. If for example, the employer’s holiday year starts on 1 January, it will not impact on that employer and its employees until 2025.

The Government has also provided definitions for an ‘irregular hours worker’ and ‘part-year worker’ to provide some further clarity and our Employment Law Team are always happy to provide further advice on specific arrangements as requested.

Blandy & Blandy’s specialist Employment Law team can advise employees and employers on the full range of Employment Law matters. For further information or legal advice, please visit www.blandy.co.uk.