Changes to holiday entitlement and holiday pay calculations as part of the Retained EU Law (Revocation and Reform) Bill were introduced in January 2024 and came into force for holiday periods starting in April 2024.
While employers with annual leave schemes commencing in April should have already applied the new legislation, those operating annual leave on a calendar year basis will need to prepare ahead of the changes impacting them from January 2025.
These changes aim to simplify the process, though some argue they add complexity.
Understanding the key changes
There is now a new method for calculating statutory holiday entitlement for irregular hours and part-year workers.
This method ensures that holiday entitlement is accrued fairly based on the actual hours worked, addressing previous inconsistencies.
It is calculated at 12.07% of actual hours worked in a pay period, based on the 5.6 weeks statutory minimum holiday entitlement.
The new regulations also introduce clear definitions for irregular hours and part-year workers, rolled-up holiday pay for these workers and provisions for calculating leave accrual for workers who take maternity or family-related leave or are off sick.
Practical steps for employers to ensure compliance
1. Review and update contracts
Employers must review, and if necessary, update their contracts accurately reflect the working patterns of their employees to determine their classification under the new regulations.
2. Liaise with payroll providers
Employers should work closely with their HR teams and payroll providers to understand the impact of the new regulations and ensure effective implementation and avoid potential legal issues.
3. Communicate changes clearly
Inform employees about any changes to holiday pay and entitlement.
Clear communication is key to ensuring employees understand the new regulations and how their holiday pay and entitlement will be affected.
4. Seek professional advice
Employers who are unsure about how the new regulations will impact their business should seek professional employment law advice.
This is particularly important to ensure compliance and avoid potential disputes.
Navigating holiday pay changes
While the aim of the new UK holiday pay regulations was to simplify the process, employers must take proactive steps to ensure compliance.
By updating contracts, co-ordinating with HR and payroll providers, and communicating clearly with employees, businesses can navigate these changes effectively.
For further guidance, employers should seek professional advice to fully understand the impact of the new regulations.
