Holiday changes for Zero Hour Employees in April

In April 2024, significant changes to the holiday entitlement for zero hour and other irregular hours staff are set to take effect, altering the landscape of holiday pay and accrual for these workers. These changes, which amend the Working Time Regulations 1998, represent a departure from previous practices and aim to simplify the process for both employers and employees.

You first need to confirm that your zero hours employees fall within the definition of irregular hours or part year workers. Irregular hours are those workers whose paid hours set out in their contract vary in each pay period; a zero-hour contract would meet this definition as there is no guarantee of hours to be given each week. Part-year workers are those who are contractually only required to work for part of the year and for the remainder neither work nor receive pay. For example, a term time worker who only gets paid whilst their working would meet this definition.

The second thing you need to confirm is when the holiday year runs from and to. The changes being brought in on 1 April 2024 will apply to all holiday years starting on or after that date. So, if you have a holiday year that runs April to March, the changes will apply immediately. If however, you have a different holiday year, such as a calendar year (January – December), then the changes won’t need to apply until January 2025.

What's New?

The most notable change is the introduction of a new method for calculating holiday entitlement for part-year and irregular hours workers, which will be based on a percentage of the hours worked. Starting from April 1, 2024, holiday entitlement for these workers will accrue at a rate of 12.07% of the hours worked during the pay period.

Additionally, employers will have the option to choose between two methods for paying holiday pay to these workers:

1. Holiday Accrual: Holiday can be booked as usual and paid when it is taken.
2. Holiday Pay: Alternatively, holiday pay can be rolled up with the normal pay, meaning an additional amount is included within every payslip to cover a worker’s holiday pay. This second option, known as "rolled-up" holiday pay, is a significant shift from the traditional method and is designed to simplify the process for employers who find it challenging to determine when a zero-hour worker is on leave.

How It's Different from the Past

Previously, the calculation of holiday pay for irregular hours and part-year workers was less straightforward and often required interpretation of complex case law. Before April 2024, the holiday entitlement for irregular hours and part-year workers was calculated based on the average hours worked in the previous 12 weeks. This method could result in fluctuations and inaccuracies in the holiday entitlement depending on the seasonality and variability of the work.

The new method of 12.07% of actual hours worked in a pay period is intended to simplify and standardise the holiday entitlement calculation for these workers. It provides a clear and consistent method for calculating holiday entitlement, which is expected to be easier for employers to apply and for workers to understand.

The 12.07% accrual rate is based on the statutory minimum holiday entitlement of 5.6 weeks, with the total working weeks in a year being 46.4 (52 weeks minus 5.6 weeks of leave). This new approach replaces the previous method of calculating based on weeks and instead calculates entitlement in hours.

Change in Carry Over Rules

Another change coming in April 2024 is the revocation of the amendment made in 2020 to the Working Time Regulations 1998, which allowed for the carry-over of annual leave in certain circumstances, such as during the COVID-19 pandemic. This provision will be removed, meaning that leave can no longer be carried over under these circumstances. Any outstanding carried over leave must be taken before March 31, 2024.

However, the right for workers to carry over annual leave in certain other circumstances, such as due to sickness or family-related absence, has been enshrined in the new regulations. This reflects existing case law and does not represent a change but rather a codification of current practices.

Implications for Employers and Employees

Employers need to review their holiday provisions to ensure compliance with the new law. They must accurately assess the status and working arrangements of their employees and adjust their systems and documents accordingly. It's crucial for employers to encourage workers to take their entitled annual leave, even if the rolled-up payment method is used, to ensure that workers can rest and maintain performance levels.

For employees, particularly those on zero-hour contracts, these changes could provide greater clarity and potentially more flexibility in how they receive holiday pay. It's important for workers to understand their rights under the new regulations and to ensure they are taking their full entitlement to annual leave.

In summary, the changes coming in April 2024 for the holidays of zero hour and other irregular hours staff are designed to simplify the calculation and payment of holiday entitlement. By introducing a clear percentage-based accrual system and offering the option of rolled-up holiday pay, the new approach aims to benefit both employers and employees by providing clarity and reducing administrative burdens.