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Most workers have a right to a minimum of 5.6 weeks paid annual leave annually.
For full-time workers (working 5 days per week) this equates to 28 days paid annual leave although many businesses offer additional holiday under their contracts.
The position regarding part-year workers and those with irregular hours (e.g., term-time or casual workers) has been complex following the Supreme Court decision in Harpur Trust v Brazel, which ruled that workers could not be paid rolled-up holiday pay at 12.07 per cent.
The decision highlighted a perceived unfairness, as part-year workers were seen to have greater holiday entitlement than other workers in proportion to the hours they worked.
On 1 January 2024, the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (SI 2023/1426) (ER Regulations 2023) came into force.
These regulations were brought in to counter the decision made by the Supreme Court.
They amended the Working Time Regulations in relation to holiday for irregular hours and part-year workers. They came into force for holiday years commencing on or after 1 April 2024.
These new rules therefore apply to workers with a January to December holiday year from 1 January 2025.
The new rules mean that holiday days are now calculated in hours instead of weeks for these workers. It accrues on the last day of each pay period at a rate of 12.07 per cent of the actual hours worked in that pay period.
During statutory leave such as maternity leave or sick leave, an average over the previous 52 weeks is used to calculate the amount of holiday accrued.
Under the new rules, employers can choose to either:
A week’s pay is broadly the average amount of weekly pay over the previous 52 weeks (including elements included in the new definition).
A week’s holiday will consist of the average number of hours worked each week over the previous 52 weeks. This should produce an hourly rate of holiday pay that reflects the average hourly rate of pay over the year.
If workers are paid rolled up holiday, they must be permitted to take their holiday but they are not paid at the time that they take it.
As set out above, rolled-up holiday pay was previously ruled to be unlawful, however, this is no longer the case in light of the ER Regulations 2023.
Employers should keep in mind that these rules may contradict a worker’s contract and it may be necessary to amend their contract to reflect this.
If you require any further information or assistance regarding holiday pay generally or these specific holiday pay rules relating to part-year or irregular hours work, please contact one of our team.
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