Holiday Entitlement Rules Update

For leave years that start from April 2024, there has been a slight change in rules regarding carrying forward unused annual leave and calculating annual leave for casual or variable workers.

NEW Obligation to encourage workers to take leave, and rules regarding the ‘use it or lose it’ around holiday entitlement:

• If an employer fails to recognise right to leave/pay or fails to give a reasonable opportunity to take the leave or fails to inform the worker the leave will be lost if not used – then 4 weeks of the annual leave is entitled to be used within the next year after the leave year ends.

• By written agreement with worker – the additional 1.6 weeks can be carried over – but this does not apply to the 4 weeks.

• There currently is no definition on how employers must inform workers – but it’s best to do it in writing as you will need to prove you told them

• The entire accrual can be carried over for irregular or part year workers as their accrual is no longer going to be defined solely on a 5.6-week basis

Irregular Worker defined as if number of hours in term of their contract in that year is wholly or mostly variable

Part-year worker is defined as (in their contract) work only part of that year and there are periods within that year of at least a week which they are not required to work for which they are not paid.

There will be 2 options for annual leave calculation for casual workers – this is the EMPLOYER’S choice, not the employee’s:

Option 1: How leave accrues for new categories of worker:

• Leave accrues on the last day of each pay period at the rate of 12.07% of the hours worked in that pay period.
• No longer entitled to 5.6 weeks per year – there is a requirement to take the leave that has accrued in that leave year (unless a carryover reason applies)
• Payment in lieu of leave is not acceptable at all under this option.
• When leave is taken – the rate of holiday pay is calculated by reference to average weekly pay (and average hourly rate) paid over the last 52 weeks
• Where leave entitlement is a fraction of an hour – round up or round down to nearest 30 min
• Leave accrual is capped at 28 days
• Need to pay a “weeks’ pay in respect of each week of leave” – done on a52-weekk average (average weekly pay divided by average hours worked in the weeks used to calculate weekly pay)
  • Only include weeks were pay is actually earned
  • Don’t include weeks where the worker wasn’t required to work, where they were on sick or on statutory leave
  • Sick weeks include any amount of sick (if they are sick 1 day and work 4 days, you still ignore the whole week)
  • Only go back as far as 104 weeks

Option 2 – Rolled up holiday pay:

• Add 12.07% uplift to the hourly rate of pay (previously unlawful)
• Annual leave pay is still payable in each pay period for sick leave and statutory leave – pay based on average annual leave payments from the last 52 weeks that were paid by way of rolled up holiday
• Must be noted as a separate pay element on the payslip

How to calculate accrual on sick or statutory leave

• Step 1: calculate the average number of hours per week the EE worked in the 52 weeks prior to the sick or statutory leave
  • Don’t include weeks on sick or statutory leave
  • DO include weeks where the worker wasn’t required to work
  • Backstop of 104 weeks to get the 52 weeks of data
• Step 2: Calculate the 12.07% of the average hours per week from Step 1
• Step 3: multiply the figure in Step 2 by the number of weeks in the pay period where sick or statutory leave is being taken to find the number of hours the works is accruing in that period

To help our clients the accrual will show on the payslip

Therefore, the amount shown on your PA’s payslip under HP Accrual is the amount of holiday pay in £’s that they have accrued since April 2024, and this figure is calculated as 12.07% of the gross pay they have received since April 2024 so it does include holiday accrued for bank holidays, even if they are not normally worked.

If you want to know the HP accrual in hours, then divide this figure by their current rate of pay and this will give you the number of hours they have accrued.

You do not need to submit anything different for bank holiday hours/holiday, you just need to submit the hours that your PA actually worked and when they take holiday let us know the number of hours holiday they have taken.