In 2019 a Supreme Court ruling (Harpur Trust v Brazel) meant that permanent part-year workers, and irregular hours workers were entitled to 5.6 weeks’ holiday pay, based on their average weekly pay during the weeks they worked (disregarding any periods where no work was done). This meant that in theory, part-year workers would be disproportionately advantaged, when compared with their full-time colleagues.

Before the Conservatives left government in July 2024, they changed the statutory regulations, to allow for irregular hours or part-year workers to have their holiday paid to them on the basis of a 12.07% calculation of their pay received during the pay period. This calculation can be used during any holiday year which starts after 1st April 2024.

The 12.07% calculation is based on the statutory minimum amount of holiday. If contracts provide a more generous holiday allowance, then the percentage must be amended accordingly.

What qualifies as an ‘irregular hours worker’?

The new regulations define irregular hours workers as ‘wholly or mostly variable’ paid hours under the terms of their contract in each pay period. This could mean a casual or zero hours contract, or a contract which states their hours are variable, provided that the reality is that their working hours vary week to week.

What qualifies as a ‘part-year worker’?

A part-year worker is defined as a worker who is only required to work for part of the year, and there must be periods in the year of at least a week during which they are not required to work, and for which they are not paid. These workers may have fixed hours for the times they are working (unlike irregular hours workers).

Practicalities

The changes mean that in one pay period (for example a month, if paid monthly; a week if paid weekly) you can calculate holiday pay based on the relevant percentage calculation (12.07% for statutory minimum holiday) and pay this directly to the worker, provided it’s listed separately as ‘Holiday Pay’ in their payslip.  This is now referred to as ‘rolled-up holiday pay’, even though it’s not incorporated in to the worker’s hourly rate.

This means that those workers would not request and take their paid annual leave, as this payment covers their statutory entitlement to holiday, and is on record as having been paid in this way.

Employers can continue to use the current 52-week reference period to calculate holiday entitlement and pay, if the worker takes paid holiday, and the government have provided further guidance on this here.

Here are 2 worked examples:

Employee A is entitled to statutory holiday (5.6 weeks holiday per full year), and they are an irregular hours worker. The company holiday year started on 1st April 2024. Employee A is paid monthly.

In July, Employee A worked a total of 50 hours, on a normal pay rate of £15 per hour.  They also worked 8 hours of overtime on x1.5 their hourly rate. Therefore their pay for July is calculated as follows:

50 x £15 = £750

8 x £15 x 1.5 = £180

Employee A’s total pay for July is £930.

In order to calculate Employee A’s holiday pay, this would be 12.07% of their pay for that month. As they are entitled to statutory holiday, you would do the following calculation:

£930 x 12.07% = £112.21

The holiday pay that can therefore be processed for July 2024, with the employee’s normal pay would be £112.21

Employee B is entitled to contractual holiday which totals 6.4 weeks for a full year, based on a full-time entitlement. They are a part-year worker, and the holiday year started on 1st July 2024. Employee B is paid monthly.

In July the employee didn’t work at all. However they worked full-time hours during August, which totalled 165 hours, at a normal pay rate of £20 per hour.

Employee B’s pay for July is zero, therefore they would not be entitled to holiday pay for that month.

However in August their total pay was 165 x £20 = £3,300.

In order to calculate Employee B’s holiday pay, you first need to establish the correct percentage to use.  This is calculated as follows:

52 weeks – 6.4 weeks = 45.6.

6.4/45.6 = 14.04

Therefore the correct percentage holiday pay accrual for Employee B is 14.04%

To calculate their holiday pay for August you would therefore do the following calculation:

£3300 x 14.04% = £463.32

The holiday pay that can therefore be processed for August 2024, with the employee’s normal pay would be £463.32

Employers however should be mindful of the details of their worker’s contracts.  If they stipulate that the worker is entitled to paid leave, in order to change to rolled-up holiday pay, employers would need to seek the written agreement of the worker in order to make this change to their terms of employment.

If you’re not sure what the changes and new rules means for your staff, get in touch.

In April 2020, it became a requirement for all employees to receive a ‘Written Statement of Employment Particulars’. This is a document which needs to be provided on or before their start date with their employer.  In addition, employees who joined their employer before 6^th April 2020 can ask for a Written Statement at any time. On receipt of a request, employers must provide it to the employee within one month of their request.

The legal requirement

With this change it became a requirement that the Written Statement included certain terms and conditions. It is no longer sufficient to rely on a basic offer letter confirming job title, salary and start date.  The terms and conditions that must be included in a written statement are as follows:

• the employer’s name
• the employee or worker’s name
• the start date
• the date that ‘continuous employment’ started
• job title, or a brief description of the job
• the employer’s address
• the normal places or addresses of work
• pay, including how often and when
• working hours and days, or if it’s variable
• holiday entitlement, including an explanation of how its calculated if the employee or worker leaves the employer
• the amount of sick leave and pay applicable
• any other paid leave
• any contractual benefits
• any non-contractual benefits
• the notice period either side must give when employment ends
• how long a temporary job will last
• any probation period, including its conditions and how long it is
• if the employee will work abroad, and any terms that apply
• what training that must be completed by the employee or worker, including training the employer does not pay for

As an employer, you need to have all these terms detailed in Written Statements you issue to new joiners. You need to quickly define your current practices and policies.  That way you will be ready for requests for a written statement from existing employees who started prior to 6^th April 2020, as well as new hires.

In addition, the law allows for other terms to be provided at a later date, within 2 months of the employee starting. These other terms relate to pension arrangements, collective agreements, non-compulsory training (if provided), and disciplinary rules.

Benefits of providing a Written Statement

As well as the legal requirement to provide details of these specific terms of employment, there are benefits for both parties in having these points clearly written down.  Both parties will know and understand what to expect from the other, and what their obligations are.  This avoids ambiguity and inconsistency, which helps to prevent unnecessary problems or employment issues.  Doing this may also prevent potential allegations of discrimination if employees are treated differently (whether inadvertently or not).  Employees will feel secure in their relationship with their employer, which is more likely to develop trust and loyalty.

If you fail to provide the relevant documentation to your employees within the timelines specified by law, the potential penalty would be between two and four weeks’ pay.

Benefits of a Contract of Employment

The requirement under law is for a Written Statement of Employment Particulars, as detailed above, however many employers opt for a full contract of employment for their employees.  This is because in a full employment contract you can include terms which protect the business interests, for example clauses around confidentiality, post-termination restrictions, intellectual property and conflict of interests.  Having everything included in one comprehensive document also reduces administration time for the business, and provides clarity for the employee.

It’s important that employers are on the front foot when it comes to providing employees with details of their terms and conditions of employment as there are clear timelines to meet and clear advantages to providing this information.

If you would like to ensure that you’re protecting your business interests, and are meeting your legal requirements to provide employees with details of their terms of their employment, get in touch.