The UK Government has tabled new laws from 2024, which aim to simplify the issues around holiday pay calculation and accrual for ‘irregular hours workers’ and ‘part-year workers’ on permanent contracts.
The new provisions mean that for these workers, the holiday will accrue at 12.07% of hours worked each pay period, capped at 28 days. Holiday pay will be based on average weekly earnings, ignoring unpaid weeks.
The model departs from the confusion caused by the recent Supreme Court decision in Harper Trust and provides a simpler accrual model accounting for varying hours.
The new regulations will also allow ‘rolled-up’ holiday pay for these workers – a 12.07% uplift to regular pay in each period, to overcome previous issues with holiday pay timing.
Dave Chaplin, CEO of contracting authority ContractorCalculator said: “These reforms are most welcome and will provide much-needed clarity and fairness around holiday pay for contractors, especially those working through umbrella companies.
“Let’s hope we will now have a fairer and transparent system for all and that we see less “holiday-pay skimming” by unscrupulous operators in the market which was highlighted some years ago on BBC’s MoneyBox when workers were seeing underpayment on their holiday pay.
“Whilst the new regulations will simplify the holiday pay calculation and work to remove any confusion for employers and workers, it is imperative that workers check their pay statements to ensure that 12.07% holiday pay is applied correctly and raise any issues with their hirer should any discrepancy become apparent.”
Crawford Temple, CEO of Professional Passport, the UK’s largest independent assessor of payment intermediary compliance said, “Simplifying the rules around holiday pay is most welcome and brings clarification for hirers and workers as we move forward into 2024.
“For some time, holiday pay and whether it is rolled-up or accrued has brought confusion – for me, it has always been about transparency so that workers understand their entitlement to holiday pay and how to ensure they are receiving the correct amount.
“There were a number of anomalies in the legislation that the court identified in the case of Harpur Trust v Brazel last year and these latest changes address the issues and simplify the calculations of pay. Let’s hope that the new legislation will ensure that workers are now treated fairly and will benefit from a transparent and compliant process to receiving the holiday pay that is due to them and that many of the reported issues on providers withholding holiday pay will become a thing of the past.”
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