Annual leave and holiday pay for part-year and irregular workers: what the changes mean for employers

The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 has recently changed how holiday pay and annual leave are calculated for part-year and irregular workers. In this short blog, we’ll look at what those changes are and explore what you as an employer can be doing to ease the transition, maintain legal compliance and provide timely advice to staff on what annual leave they’re entitled to throughout the year.

What are the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023?

The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 has introduced new rules applying to part-year and irregular workers whose holiday years start on or after 1st April 2024.

For holiday years starting on or after the 1st of April 2024, these types of workers will no longer accrue statutory annual leave in weeks, but instead in hours, proportionate to the number of hours worked.

To summarise:

• Holidays for irregular-hour workers and part-year workers are to be calculated based on 12.07% of hours worked in a pay period
• Rolled-up holiday pay for irregular-hour workers and part-year workers is legal
• There are various changes to the carrying over of annual leave.

Practical Implications for Employers

As an employer, you’ll now need to adjust your payroll and human resources systems to calculate holiday pay based on hours worked, rather than weeks or days for part-year and irregular workers. This change mandates a shift towards more granular tracking and management of working hours to ensure accurate holiday pay calculation.

Key adjustments for employers to consider include:

• Upgrading Payroll Systems: Payroll software may need updates or configurations to handle the calculation of holiday pay in hours. This includes adjusting algorithms to apply the 12.07% calculation to the actual hours worked in a pay period.
  
  
• Enhanced Record-Keeping: You’ll need to implement or refine systems for recording the precise number of hours worked by each employee. This could involve digital time-tracking solutions that offer more accuracy and efficiency than manual record-keeping.
  
  
• Training for HR and Payroll Staff: Staff responsible for payroll and HR administration may require training on the new regulations and how to apply them in practice. This includes understanding the nuances of calculating holiday entitlement for irregular hours and when to round holiday entitlement up or down to the nearest hour, ensuring compliance with the new rules.
  
  
• Regular Audits: To ensure ongoing compliance, you’ll need to conduct regular audits of your payroll practices. This helps identify any discrepancies or issues early on, allowing for corrective action before they become problematic.

What does that mean for your current employment contracts?

Many contracts drafted before the implementation of the updated regulations likely already grant employees entitlement to holiday periods calculated in weeks, as per regulations 13 and 13A of the Working Time Regulations (WTR) 1998. 

After the 1^st of April 2024, these contracts will not align with the newly introduced method of calculating holidays in hours.

As an employer, you should consider the terms of any existing contracts and decide whether modifications are necessary under the recent provisions.

That process might look like the following:

• Step 1: Contract Review
  Audit existing contracts to identify provisions related to holiday entitlement and pay that may conflict with the new regulations. Pay particular attention to clauses that calculate holiday entitlement in days or weeks, as these will need revision.

• Step 2: Drafting Amendments
  Prepare amendments that clearly articulate how holiday pay will be calculated based on the actual hours worked, referencing the 12.07% calculation method. Ensure that the amendments are consistent with other contractual terms and employment rights.

• Step 3: Communicating Changes
  Clearly communicate the changes to affected employees, explaining the reasons for the amendments and how they will be applied. Consider individual meetings or written communications for clarity.
  Provide an opportunity for employees to ask questions or raise concerns about the changes.

• Step 4: Implementing Amendments
  Once agreed upon, formalize the amendments in writing. Both the employer and the employee should sign the updated contract to ensure mutual agreement.

• Step 5: Monitoring Compliance
  Regularly review contractual compliance with the new regulations, especially when changes in working hours or patterns occur.

If you require assistance with an employment law matter, our team of experienced employment lawyers are ready and waiting to give you the advice and support needed.

Call us on 0161 930 5151, email us at Enquiries@gorvins.com or fill in the online form.