Understanding the 2024 Holiday Pay Reforms: 5 Key Points for UK Employers

The UK Government has released fresh guidance aimed at demystifying calculations and solidifying entitlements, particularly for those with irregular schedules or who work part-time. 

Issued last January and formally known as the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023, these changes are a game-changer for employers dealing with irregular hours and part-year workloads.

To help you navigate these important changes, here are five key points for UK employers:

1. Revised Holiday Entitlement for Irregular and Part-Year Workers
   

Previously, calculating holiday pay for staff with unpredictable hours proved complex. The 2024 reforms simplify this by introducing a standard 5.6 weeks’ paid holiday entitlement for part-year and irregular hours workers, calculated using the 12.07% accrual method. This method involves accumulating 12.07% of a worker’s earnings in each pay period as holiday pay. Remember, this applies to leave years starting on or after 1 April 2024.

2. Adoption of Rolled-Up Holiday Pay:
   

Employers can now use the “roll-up” method to calculate holiday pay for part-year and irregular-hour workers. It means paying them their holiday pay upfront alongside their regular pay, instead of accruing it throughout the year. This simplifies administration and offers greater clarity for employees. However, remember:

• You’ll need to calculate it at 12.07% of their total pay in each pay period.
• Itemise it on their payslips as a separate line item.
• Ensure they still take at least 5.6 weeks of annual leave a year.
  

3. Extended Carry-Over Provisions for Family-Related Leave:
   

Unused annual leave due to family-related absences can now be carried over for up to 5.6 weeks to the next holiday year. It applies to leave taken for reasons like parental leave or caring for dependents. However, keep in mind: The additional leave (e.g., bank holidays) has a shorter carry-over limit of one year.

• The carried-over leave must be used by the end of the next holiday year.

4. Provisions for Long-Term Sickness:
   

Previously, unused annual leave due to long-term sickness could only be carried over for one year. The 2024 reforms extend this to up to 4 weeks, offering employees added flexibility. However, the carried-over leave must be used within 18 months of the end of the holiday year it accrued. Additionally:

• Ensure your policies reflect this 18-month carry-over rule.
• Clearly outline how holiday entitlement is managed during long-term sickness absences.
• Regularly inform and remind employees on long-term sick leave about their accrued holiday and the carry-over limits.
  

5. No More Carry-Over for COVID-19 Leave:
   

As the pandemic situation evolves, the ability to carry over annual leave due to COVID-19 is ending. Any COVID-19 leave accrued before 1 January 2024 can still be taken until 31 March 2024. However, no further carry-over is allowed for COVID-19-related absences occurring after this date.

Moving Forward:

These reforms bring significant changes to UK holiday pay regulations. As an employer, it’s crucial to understand these updates and adapt your practices accordingly. Review your contracts, update your policies, and communicate the changes clearly to your staff. 

The team of experienced immigration and employment law specialists at Davenport Solicitors can help ensure compliance and navigate these reforms. Schedule a consultation with us today at www.davenportsolicitors.com or give us a call at +44 020 7903 6888.