The Working Time Regulations 1998 (WTR) have undergone significant amendments effective from January 2024. One area of change targets workers with irregular hours. In effect, these changes are most likely to apply to casual workers and workers on zero-hours contracts.
Irregular hours workers are defined under the new regulations as those whose paid hours of work are wholly or mostly variable in each pay period throughout the term of their contract. The key element here is that the number of worked hours is defined in the contract, not even as a pattern of hours changing from day to day or from one week to another. Workers with fixed hours but variable pay due to overtime or shift premiums are not classified as irregular hours workers.
The change applies to the leave year starting on or after 1 April 2024. In practice, most employers align their leave year with the calendar year and the changes will affect the leave starting 1 January 2025.
The amendments introduced the calculation of holiday leave and pay for irregular hours workers at a rate of 12.07% of the hours worked in a pay period. This was previously specifically prohibited.
The 12.07% figure is derived from the statutory minimum holiday entitlement of 5.6 weeks, equating to 12.07% of a full-time working year (46.4 weeks).
Employers are required to calculate and record holiday accrual on the last day of each pay period. This new method simplifies holiday entitlement calculations by correlating directly with the actual hours worked.
Employers can choose between two methods for paying holiday entitlement:-
1. Paying when leave is taken as before the change: holiday pay is calculated based on the
average weekly pay over the previous 52 weeks, providing an hourly rate of holiday pay
that reflects the average pay rate.
2. Rolled-up holiday pay: this option allows employers to include a 12.07% holiday pay uplift
in each payslip. This method ensures workers receive their holiday pay alongside their
regular wages, although employers must still allow workers to take their accrued leave.
Leading experts in print, promotional clothing, staff uniforms, branded merchandise and PPE. Involution is your brand partner for promotional marketing and workwear, a one-stop-shop for your branded marketing needs for any business size and industry.
During periods of sick leave or statutory leave (such as maternity leave), holiday entitlement accrues based on 12.07% of the average working hours over a 52-week reference period. This ensures that workers continue to accumulate holiday entitlement even when not actively working.
It would be advisable for employers to decide in advance about whether or not to implement the rolled-up holiday pay. If the new rolled-up holiday pay is the selected option, then the employment contracts will need to be reviewed and updated. In most cases, the introduction of the new regime will require variation of the employment contracts, which will require prior consultation with the affected workers.
