The holiday reference period in the UK for variable working hours, including zero-hour contracts and seasonal workers will change in April 2020.
From 6 April 2020, The Employment Rights (Employment Particulars and Paid Annual Leave) (Amendment) Regulations 2018 will make some important changes to how holiday pay is calculated for some.
The change to the reference period comes as part of the UK government’s ongoing actions to increase transparency between employers and employees.
Holiday pay reference period
Under the UK Working Time Regulations 1998, all employees have a minimum of 5.6 weeks of holiday leave every year (calculated pro-rata for part-time employees). For full time staff that normally equates to 28 days per annum and can include the UK bank holidays.
Those with working hours that vary have had their leave calculated using a 12-week reference period. The average pay from the employee’s last 12 weeks of earnings (discounting other leave, statutory payments, or period where no earnings are received) is then used to calculate the pay that they receive for their leave.
What is new?
From 6 April 2020 the reference period for calculating holiday pay for variable hours workers will increase from 12 to 52 weeks.
The 52-week reference period will function in the same way as the previous 12-week period:
Employers must count back across the last 52 weeks that the employee has worked and received pay.
So, weeks in which no pay was received will not be counted towards the 52-week average.
In situations where employees have worked for less than 52 weeks, employers should use as many full weeks of work as possible to calculate holiday pay.
Contractually obliged overtime worked during the reference period must also be included in holiday pay.
What to do in preparation?
• Put procedures in place to record voluntary overtime from 6 April 2020.
• Assess which pay components will be covered as part of the reference period.
• Train payroll employees in the new regulations.
The UK government is expected to release official guidance on these holiday pay changes closer to the implementation date. [1]
[1] Reproduced from AccountingWEB