Unpacking the 2024 holiday pay changes for irregular-hours workers and part-year workers

Many businesses are working hard to understand the new holiday pay regulations, which took effect on 1 April 2024.

The reforms are some of the biggest changes since The Working Time Regulations 1998, impacting irregular-hours workers and part-year workers' holiday leave.

Our blog post explains the changes and the implications for your business and employees.

The 52-week average is no longer required

Previously, holiday pay for irregular-hours workers and part-year workers was based on their average pay over the previous 52 weeks.

Under the new changes, the 52-week average is no longer required.

Instead, 12.07% of actual hours worked in a pay period is to be used.

Starting from 1 April 2024, you will accrue holiday pay at 12.07% on the last day of each pay period if you are:

• A part-year worker
• A worker with irregular hours

Note: The new categories are 'irregular-hours workers' for those whose contractual hours are wholly or mostly variable and 'part-year workers' who are employees whose contracted hours require them to work part of the year only, such as term-time workers. This doesn’t include periods when employees take a break from work, such as parental leave.

The 12.07% figure is based on the fact that all workers are entitled to 5.6 weeks of leave.

A worker’s total working weeks in a year is 46.4 (52 weeks in a year minus 5.6 weeks of leave) – 12.07% of 46.4 is 5.6.

Example: Sarah has worked part-time at your business for three years. Rather than calculating her holiday pay based on her earnings over the past 52 weeks, you should now base it on 12.07% of her hours worked.

Employers can continue to calculate on an average of the last 52 weeks; however, using 12.07% of the previous pay period will ensure holiday pay is a more accurate reflection of the pay rate at that particular time.

Rolled-up holiday pay for irregular-hours workers and part-year workers

Following the changes, employers can now “roll-up” holiday pay into a basic rate of pay for irregular-hours workers and part-year workers only.

With rolled-up holiday pay, employers can include an additional amount with every payslip, covering a worker’s holiday pay, as opposed to paying holiday pay when a worker takes annual leave.

When opting for rolled-up holiday pay, the calculation should be based on a worker’s total pay in a pay period.

Note: if you intend to offer rolled-up holiday pay, you should check your workers’ contract in case this amounts to a variation of the contract. You must also make workers aware if you intend to use rolled-up holiday pay and it should be clearly marked as a separate item on each payslip.

Leave carryover

If a regular-hours worker is unable to take some or all their leave due to sickness, they can carry up to 20 days of that untaken leave into the next leave year.

Now, an irregular-hours worker or part-year worker will also be entitled to carry across up to 28 days of leave should they also be unable to take it due to sickness.

Like regular workers, irregular-hours workers or part-year workers will need to use the leave they have carried over within 18 months, starting from the end of the leave year in which it was accrued.

Additionally, workers can carry their leave into the next year if:

• The employer has not recognised a worker's right to annual leave or to payment for that leave

• The worker has not received reasonable opportunity to take their leave and encouraged to do so
• The employer did not inform the worker that their untaken leave must be used before the end of the year to prevent losing it 

Make holiday pay simple

For an in-depth look into all the changes, visit gov.co.uk here.

If you're looking for assistance managing holiday pay, our cloud payroll software can support, saving you hours of manual calculation thanks to automation.

Browse all of our payroll solutions.