New Holiday Pay Calculations April 2020

From 6th April 2020, the Employment Rights (Employment Particulars and Paid Annual Leave) (Amendment) Regulations 2018 comes into force. This means that if you work irregular hours (e.g. shifts or rotas), or if you do casual work with no fixed hours, the calculations used to work out your holiday pay will be changing.

How is holiday pay calculated?

Currently, holiday pay is calculated based on the average number of hours worked at the average hourly rate in the last 12 weeks. This is called the 12-week reference period and is used to calculate average weekly pay. Overtime and commission are also included in the calculation. However, any weeks during which monies are not earned are excluded from the calculation. This includes weeks of annual leave, sickness absence, nil earnings and weeks when an employee has received statutory payments.

Why is it changing?

Using the current method, even if an employee gets paid a small amount of pay for the week, it is included in the 12-week average. So, this method penalises those working irregular hours, should they choose to take their holiday after quieter times of work. The new law has been brought in to ensure that these workers are treated more fairly and equally to those who work fixed hours.

How will it be calculated from 6th April 2020?

The new law increases the holiday pay reference period from 12 to 52 weeks. The method of calculation is the same, so any weeks that are not worked are not included in the calculation. If this is the case, then earlier weeks are used until you have 52 paid weeks to do the calculation. For new employees who have not worked 52 weeks, the holiday pay calculations use the number of paid weeks which are available. This change means that the holiday pay will now better reflect the worker’s normal pay.

What can you do to prepare for the change?

Employers need to make sure that they are trained on the new requirements, and that HR or legal advice is taken if necessary. Working hours and overtime need to be recorded, especially for the 52 weeks prior to 6th April 2020, and this needs to continue to be logged accurately. For further advice and guidance contact Lansbury HR.