Holiday pay changes: are you compliant?

February 11, 2025

Holiday pay changes: are you compliant?

---

By Nicole Brendel

Changes to the rules on holiday entitlement and pay came into force in 2024 for many businesses, but employers which have started a new holiday year in January 2025 are now affected by these too.

Our employment law expert Nicole Brendel answers some tricky FAQs on how to handle holidays for workers who work irregular hours or for part of the time, to get you up to speed on what you need to know.

What has changed?

Changes to the Working Time Regulations (WTR) were made in January 2024 which aimed to simplify the rules on holiday entitlement and pay for those workers who don’t work fixed or full-time hours. Some of the most important changes were:

1. New categories of an “irregular hours” worker and a “part year” worker have been introduced into the WTR, and a new way of calculating holiday entitlement has been introduced for these types of workers.
2. New rules are in place for working out how much holiday workers can accrue when they take sick leave, maternity leave or other types of family leave.
3. “Rolled up holiday pay” is now allowed to be paid to irregular hour workers and part year workers. You can read more about this in our previous article here.

What is an “irregular hours” worker?

An irregular hours worker is someone who works “wholly or mostly” varied hours between each payment date. A classic example is someone working on a zero-hours contract who is working different hours each week.

What is a “part year” worker?

A part year worker is someone who works for only part of the year and who has at least one week during the year when they are not required to work and for which they are not paid, for example a seasonal worker.

Not receiving pay over the time that the worker is not working is important; for example, if someone is paid a salary over 12 monthly instalments, despite not working over a summer break (like most teachers in the UK), they wouldn’t fall within this definition and aren’t covered by the new rules.

What is the new holiday calculation for irregular hours and part year workers?

Irregular hours and part year workers’ holiday entitlement will be calculated at 12.07% of the actual hours worked during each pay period (or more if the employer offers a more generous holiday allowance than the statutory minimum of 5.6 weeks under the WTR). The pay period is the frequency for which the worker is paid, e.g. weekly or monthly. This means that employers should update their workers’ holiday entitlement at the end of each pay period by looking back at the hours worked and doing the 12.07% calculation.

Is there any change to the holiday entitlement for fixed hours workers?

No; the 5.6 weeks entitlement remains the same for a worker who works fixed hours each week. For a typical full-time worker, that equates to 20 days plus 8 bank holidays.

How do I work out how much annual leave my irregular hours workers accrue during sick leave or family leave?

You can calculate the accrual by taking an average of the hours worked during the preceding 52-week period immediately prior to the family-related leave or sickness absence (or a shorter period if the worker hasn’t worked for a full 52-week period so far).

The period must only include weeks where the worker worked and exclude previous periods of statutory leave or sickness leave. If necessary, you can look as far back as a 104-week reference period to gain a full 52-week period.

Once this has been worked out, the accrual calculation is based on the average hours accrued x the number of weeks of absence.

How do I calculate holiday pay?

Remember that holiday pay (what rate of pay workers should be paid for the holidays they get) is different to holiday entitlement (how many hours’ or days’ holiday they get).

For workers whose pay fluctuates, holiday pay can be calculated based on a 52-week reference period, using an average of the last 52 weeks for which a worker has worked and earned pay (or a shorter period if the worker has not worked for 52 weeks). Again, the period must only include weeks where the worker was actually paid and if necessary, you can look as far back as a 104-week reference period in order to gain a 52-week reference period.

Alternatively, you can use rolled-up holiday pay for irregular hours or part year workers. Read more about rolled-up holiday pay here.

Our tips for employers

• Ensure your employment contracts or casual worker agreements are up-to-date for any irregular hours or part year workers. Your contracts need to reflect these changes, including an explanation that rolled up holiday will be paid if this is the case. If you are changing any existing contracts, a consultation with your staff may be needed to change the terms and conditions. Our employment law and HR specialists can assist you further with this.
• Ensure you have clear records of weeks and hours worked, as well as pay and dates of holiday taken.
• Make sure you have a good Holiday Policy in your staff handbook or on your intranet which your staff can look at to understand what they can expect when it comes to holidays.
• Take a look at our helpful flowchart below to help you understand these changes and what you need to do.

 If you need any further advice on any of the above, please contact Nicole Brendel (nbrendel@darwingray.com or 029 2082 9100) or another member of the employment team at Darwin Gray for a free initial chat to see how we can help you.