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HOLIDAY ACCRUAL TO COME IN FOR ZERO-HOURS WORKERS

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Following changes to the Working Time Regulations 1998 in January 2024, further amendments are set to come into force on 1 April 2024 relating to leave entitlement for workers on irregular hours.

Upcoming changes will apply to workers on zero-hours or irregular hours contracts, as well as those who are on ‘part-year’ contracts, such as those who work seasonally.

By definition, these are workers whose hours:

  • Are laid out in their contract as variable for each pay period
  • Only require them to work for part of the year.

For example, a worker on a zero-hours contract is not guaranteed a certain number of hours each pay period, so they come under the scope of the new regulations.

Alternatively, a student worker who is only contracted to work during term time also meets the definition of irregular hours.

What will these changes look like?

These new regulations aim to reduce confusion around the holiday entitlement for workers on irregular hours.

They are also designed to avoid workers accidentally being assigned more or less holiday than allowed by their entitlement.

Irregular hours workers will accrue holiday based on 12.07 per cent of the hours worked within a particular pay period.

This means that entitlement will be calculated in hours instead of days.

Permitted methods of holiday pay

Updates to the Working Time Regulations also provide for two ways of paying holiday pay to workers.

Employers can either:

  • Pay for holidays in the pay period in which they are taken, using an average based on the previous 52 weeks of data
  • Use the ‘rolled up’ method, which adds a percentage of total holiday pay onto each pay period. Please be advised that this is only an option for workers on zero-hours or irregular hours contracts, and is still deemed unlawful for other employees.

Although not previously allowed, rolling up holiday pay will be permitted from 1 April – but it must follow certain rules.

If the ‘rolled up’ method is used, you must make it clear on a worker’s payslip what proportion of their pay comes from holiday pay.

You must also pay it in the period in which the holiday accrues and calculate it based on total earnings during a pay period.

When do these rules apply?

New regulations will come into force on 1 April 2024 – but it is more complex than this.

Workers will be entitled to their new holiday entitlement starting from the next holiday year after 1 April.

For example, if your holiday year runs from 1 April to 31 March, the new regulations will apply straight away.

However, if your holiday year runs from 1 January to 31 December, then new holiday allowances will apply only from 1 January 2025 and for every holiday year following that.

For more payroll advice and support with planning for staff costs, please get in touch with us.