Do you employ ‘seasonal’ workers or workers on flexible, ever-changing hours?
You may be in the leisure and tourism industry or simply employ young workers who are only available in the summer holidays. Whatever the reason may be, the Government has recently released new guidance on changes to holiday pay for seasonal and irregular hours workers that you should probably get familiar with.
In case you missed it, here is the original heads-up from our employment law partner, Hannah Pryce.
If you’re short on time and don’t fancy reading what is an inevitably complex guidance note on The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023, I will try my best to help by highlighting the key changes you need to get to grips with.
The changes are already in effect as of 1 January 2024 but the new accrual rate only applies to leave years starting on or after 1 April 2024. So, what do you need to know?
‘Irregular hours workers’ and ‘part year workers’ – what do we mean?
Type of worker
Irregular hours worker
The number of paid hours the worker works in each pay period is, under the terms of their employment contract, wholly or mostly variable
If the contract specifies that the worker will work on a pattern of 30 hours in week 1 and then only 15 hours in week 2, this would not be ‘wholly or mostly variable’.
Some zero-hour workers may fit this definition.
The worker is required to work only part of the year and there are periods within that year of at least one week where they are not required to work and will not be paid for.
These are more commonly referred to as ‘seasonal workers’.
A worker who is paid an annual salary (as opposed to by the hour) is unlikely to fit this definition.
Rolled-up holiday pay
Holiday entitlement for irregular hours workers and seasonal workers will accrue at a rate of 12.07% per actual hour worked in a pay period. The guidance sets out a useful example of to do this calculation in practice.
If adopting the reference period method of accrual (which is the most common and easiest method), the holiday pay the workers should receive is their average pay over the previous 52 weeks worked. Weeks where they did not work should be excluded, along with any time when the worker was on sick leave, maternity leave or any other family-related leave.
In order to find these 52 weeks worked, you should go back as far as 104 weeks. If, when looking back over 104 weeks, less than 52 weeks were worked, you should take the average on the basis of this lower number of weeks worked.
If the worker does not take their accrued holiday entitlement by the time they leave, they should be paid a sum to equal to this (payment in lieu).
Commission and overtime
Workers’ average pay for the purposes of calculating their holiday pay should include:
payments (including commission) that are paid dependent on the performance of the worker’s contractual obligations/tasks;
payments relating to length of service (e.g. loyalty bonuses), seniority or professional qualifications; and
any other payments (such as overtime payments) which have been regularly paid to a worker in the preceding 52 week period.
This extends to all workers/employees, not just those employed on part-year / irregular hours contracts.
What about when the workers are on other forms of leave?
When certain workers are on sick leave, maternity leave or other family-related leave, they remain entitled to accrue annual leave.
You should adopt the same accrual rate as set out above (12.07%) by calculating the worker’s hours using the following process:
Look at the hours worked in the preceding 52-week period (ie. starting on the day they began their leave/went off sick and going back 52 weeks); and
Take an average for the hours worked in a week – any weeks where the worker was on leave/off sick at any time should be excluded, but do include any weeks not worked for any other reason. If the worker only joined the business within the 52-week period, just take an average going back for as long as they have worked for the business.
Carryover of leave
Irregular hours workers and seasonal workers are entitled to carry over up to 28 days of leave where they are unable to take their statutory holiday entitlement due to maternity leave, sick leave or any other family-related leave. The workers have to use this carried-over leave within 18 months of the end of the relevant leave year otherwise it will be lost.
Employers should make the workers aware and encourage the exercise of this right to carryover leave where applicable.
If you have any questions about calculating holiday pay and entitlement, please contact a member of the team here.
The information on this site about legal matters is provided as a general guide only. Although we try to ensure that all of the information on this site is accurate and up to date, this cannot be guaranteed. The information on this site should not be relied upon or construed as constituting legal advice and Howes Percival LLP disclaims liability in relation to its use. You should seek appropriate legal advice before taking or refraining from taking any action.
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