By hayley - These updates, effective for holiday years starting on or after 1st of April 2024, will directly impact businesses that rely on casual or seasonal staff. It’s critical to understand the changes to stay compliant.
Under the new rules, starting with your next holiday year, you’ll be able to return to the 12.07% method for calculating holiday entitlement for adhoc and part-year workers, depending on what’s outlined in your employees' contracts. Since the Harpur Trust v. Brazel ruling in 2019 (and the subsequent appeal in 2022), employers had been required to calculate holiday entitlement for these workers based on full-time equivalents (FTE) and length of service, rather than hours worked. The 12.07% method had been deemed unlawful under the Working Time Directive.
But now, with the updated regulations, you can calculate holiday entitlement based on the actual hours worked, including things like overtime and commissions. This change simplifies the process and more accurately reflects the time an employee has spent working for your business. However, you’ll still need to maintain strong records of weekly hours worked, as holiday pay will continue to be based on a 52-week average.
Remember, employees continue to accrue holiday even when they’re off sick, or on maternity or paternity leave. The amount to add to their holiday entitlement is calculated using the 52-week method, but unlike the holiday pay calculation, you include all weeks in the 52-week period, even if no hours were worked. For holiday pay calculations, however, you only count weeks where hours were worked. For both calculations, you go back up to two years, until you reach 52 weeks, or however long the employee has been with you, if it’s less than 52 weeks.
Additionally, "Rolled-Up Holidays" have been reintroduced for certain employees. This allows holiday entitlement to be paid out in each payroll run, eliminating the need for separate calculations when the employee actually takes time off. Careful consideration is needed when deciding which method is appropriate for your business.
Now’s the time to review your current practices and update your payroll systems and contracts to align with these changes. Staying ahead of the transition, and clearly communicating with your employees, will ensure a smooth adjustment for everyone.
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Hayley