Many employers remain unaware of new rules that significantly changed employee holiday rights and pay, which the government introduced on 1 January 2024, law firm Furley Page has warned.
Changes to the Working Time Regulations were brought in as part of government reforms that came into force on the 1 April 2024. They are designed to simplify holiday entitlement rules and holiday pay calculations, as well as clarify the definitions of irregular hours workers and part-year workers.
However, Patrick Glencross, senior associate in the employment team at Furley Page, told Benefits Expert that his practice has become aware “that many employer organisations are not aware of the new legislation and so have not taken any actions to bring their contracts, policies and processes up to date”.
He added: “Clients in the education and leisure sectors, where there is a greater use of term-time only contracts, are probably more aware than others.”
But he said it was vital all employers comply with the new rules as failure to do so could constitute a breach of contract.
What has changed?
Glencross highlighted the new definitions for an ‘irregular hours worker’ and a ‘part-year worker’ because they are central to the introduction of a new holiday entitlement accrual method and rolled-up holiday pay.
He explained that an ‘irregular hours worker’ is someone whose number of paid hours in each pay period is wholly or mostly variable. For example, a hospitality worker who works a different number of hours each week would qualify as an irregular hours worker if the contract said that the hours worked will be wholly or mostly variable in each pay period. This could be a casual contract, which is also known as a zero-hours contract.
A ‘part-year worker’ is someone who is required to work only part of the year and is not paid for the remainder, e.g. term-time employees. Another example of a part-year worker would be a seasonal worker in the farming industry who only works and gets paid during spring and summer months. This type of contract would need to show that there are periods of time that last more than a week when this person is not contracted to work and does not receive pay.
Under the revised legislation, the new method to accrue holiday entitlement in hours for irregular hours and part-year workers has been set at a minimum rate of 12.07 percent of actual hours worked in a pay period.
There is also a new method for calculating holiday entitlement for these two groups of employees when they are off sick or taking maternity leave or family-related leave, as well as an option to pay them ‘rolled-up holiday pay’.
The changes have confirmed the right to carry over holiday into the next holiday year in some circumstances and confirmed the requirement to include certain payments, such as regular overtime and commission, in calculating holiday pay for statutory purposes.
Glencross commented: “While the changes provide clarity and simplify some areas, holiday rights remain complex. Calculating annual leave and holiday pay for any employees who work irregular hours can be challenging, so now is a good time for employers to take stock and ensure that their organisation is compliant, as failure to accurately calculate holiday entitlement and pay could constitute a breach of contract.”
He added: “Such steps could include identifying which employees are irregular hours workers or part-year workers, reviewing which payments are included in holiday pay calculations, and checking policies, contracts and practices to take account of any changes necessitated by the new rules.
“In addition, adjusting payroll systems to process the accrual of holiday hours, ensuring payslips itemise the element of rolled-up holiday pay, and setting up systems to remind employees to take their holiday in time, will help to ensure employers do not fall foul of the new laws.”
