HR Expert: What is changing with holiday entitlement?

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My client has a number of zero hours employees that they use, which are necessary because of the nature of the fluctuations in their business. The employees on these contracts have now approached my client to say their holiday entitlement is changing from April 2024. Is this the case?

Holiday for irregular hours staff and part year staff is set to change significantly from April via changes to the Working Time Regulations 1998, and your client’s employees are correct that your client will need to act on this.

Firstly, your client needs to confirm that their zero hours employees fall within the definition of irregular hours or part year workers. Irregular hours are those workers whose paid hours set out in their contract vary in each pay period; a zero hours contract would meet this definition as there is no guarantee of hours to be given each week. Part-year workers are those who are contractually only required to work for part of the year and for the remainder neither work nor receive pay. For example, a term time worker who only gets paid whilst their working would meet this definition.

The second thing your client needs to confirm is when their holiday year runs from and to. The changes being brought in on 1 April 2024 will apply to all holiday years starting on or after that date. So, if your client has a holiday year that runs April to March, the changes will apply immediately. If however they have a different holiday year, such as a calendar year (January – December), then the changes won’t need to apply until January 2025.

Once your client has identified which workers within their organisation the changes will apply to, and when, they will need to make the following changes to their employment contracts. Note that whilst the law will have changed, consultation is still needed for contractual changes and the agreement of the affected employees sought and gained. Where they do not agree, it may be necessary to formally consult with the employees and consider forcibly changing the contracts if necessary.

The changes that your client will need to apply are as follows:

• For holiday years starting on or after 1 April 2024 part year and irregular hours workers will accrue holiday based on 12.07% of the hours worked in the pay period.

• A choice of one of two methods to pay holiday pay to irregular hours and part year workers will be available.
o Either holiday is booked as normal and paid when it’s taken, or
o It is “rolled” up and paid in each pay packet so no pay is received during leave. If your client uses this method they must uplift pay by at least 12.07% each pay period. This must have its own separate line on the payslip which states how much holiday pay is included and your client will need to ensure workers on this type of holiday pay actually take leave.

These changes mean that your client now needs to review their holiday provisions and ensure they align with the law. Probably the most significant transition will be around implementing the 12.07% calculation, which some employees may not understand. It will therefore need to be explained in clear terms.

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