Seasonal workers and zero-hours contracts holiday pay changes: is your business prepared?

Changes to simplify holiday entitlement and holiday pay calculations have been introduced to protect part-year workers, and those working irregular hours or on zero-hours contracts. This is particularly relevant to those in hospitality leisure and tourism, agriculture and the charity sector.

New method for calculating holiday pay

If your business or organisation employs workers who:

• are on zero-hours contracts
• are paid on hours which are wholly or mostly variable
• have contracts which only require them to work part of the year

you may need to change the way you calculate and accrue holiday entitlement for these employees for holiday periods that started on or after 1 April 2024.

The new accrual method for calculating holiday pay – introduced on 1 January 2024 in the Working Time Regulations - is calculated at 12.07% of actual hours worked in a pay period. The calculation is based on the 5.6 weeks statutory minimum holiday entitlement.

The regulations also entitle part-year and irregular hours workers to what is known as rolled-up holiday pay.

Key points to consider

Planning:

• Understand which employees will fall into the definition of part-year workers and employees working irregular hours.
• Engage with your payroll team to ensure you can efficiently access the 52 week data that is needed for some of the revised calculations.
• Ensure that financial budget forecasts are updated to reflect the changes. Where any additional costs forecasted as a result, in the case of a charity these should be communicated to the Board of Trustees.
• If opting to adopt ‘Rolled up holiday pay’, a review would be beneficial to your cashflow.

Compliance:

• Consult with your HR team/consultant to determine what will now constitute ‘normal pay’.
• Review contracts of employment when reviewing which employees will be affected.
• Consider if any decisions made will require contract variations to be agreed.
• Update your holiday pay policy to reflect any changes.

Communication:

• Ensure that changes are effectively communicated with employees
• Consult with relevant stakeholders/ trustees on any changes needed to remain compliant with the reform, and seek challenge and feedback to ensure a robust solution is implemented.