What Is Changing To Holiday Pay For Employees Without Fixed Hours?
The law around calculating holiday pay for workers, without fixed hours or fixed rates of pay has changed.
These changes implement the Good Work Plan, and take effect from 6 April 2020. In light of these changes, the government guidance on how to calculate holiday pay for workers without fixed hours or fixed rates of pay, including temporary workers and workers with irregular hours or on zero-hours contracts, has been updated.
New Approach To Calculating Holiday Pay - The Changes
- The holiday pay reference period has increased from 12 to 52 weeks. Employers must now use 52 weeks' worth of pay data to calculate holiday pay for workers without fixed hours or pay.
- A week where the worker receives no pay cannot be counted towards the 52 weeks of data to be used. Such weeks should be discounted and instead an earlier week should be counted. Employers can use up to 104 weeks of data as reference periods in gathering the 52 weeks of data.
- Where 52 weeks' worth of pay data is not available, the employer should use as many weeks of pay data as they have within the preceding 104 weeks.
- A week starts on a Sunday and ends on a Saturday. If a worker takes annual leave before they have worked a full week, the employer should pay the worker an amount which fairly represents their pay for the length of time they are on leave. In working out what is fair, an employer must consider the pay the worker has already received and the amount that is paid to other workers doing a comparable role for the employer.
- Paid overtime (if contractually obliged or voluntary but sufficiently regular and considered to be normal pay) worked during the reference period must also be included in the calculation.
Best Practice
The government's guidance includes helpful examples of how to use the new reference periods, and how employers should apply those reference periods to workers without fixed hours or fixed rates of pay.