Holiday pay reform for irregular and part-year workers 

The Government has published new guidance that sets out changes and simplifies holiday pay for part-year and irregular hours workers.

The new guidance takes effect from 1 April but importantly does not extend to all staff. 

The changes follow a 2019 Supreme Court decision that means part-year workers on permanent contracts were entitled to the same holiday pay entitlement, 5.6 weeks, as full-time colleagues. 

In short, the guidance says part-year and irregular hours workers will now have holiday pay calculated on 12.07% of actual hours worked. The holiday paid out on the corresponding payslip is known as rolled up holiday pay. The calculation recognises that all workers are legally entitled to 5.6 weeks’ leave. Employers should make arrangements to monitor the leave taken in the holiday year equates to 5.6 weeks. The Government’s guidance also recognises that employees may be entitled to more than the minimum if specified in their contract. 

The guidance sets out new definitions for irregular hours workers (someone who works ‘wholly or mostly variable’ paid hours) and will extend to casual and zero-hours contracts, and to part-year workers such as seasonal agricultural staff. 

Additionally, it provides clarification on carry-over annual leave enabling part-year and irregular hours workers who were unable to take holiday because they were on, for example, maternity leave to carry over their entitlement into the following year. This change extends the right to these workers that permanent employees already have, which is to carry over holiday when on maternity leave. 

Employers should note, however, that not all holiday pay calculations will need to change straightaway, or perhaps at all. Changes should not be adopted part-way through the holiday year. If your holiday year runs, for example, January to December the new guidance will only apply from the beginning of the new holiday year – January 2025. 

For further information, the official Government guidance can be found here or contact our Payroll team.