New law: Employers prepare for changes to the way holiday pay is calculated for some workers

Employers should plan and budget for changes to the way holiday pay is calculated for workers who do not work fixed hours, such as casual workers, from 6 April 2020.

Employers who take on a person without fixed working hours, such as a casual worker, previously worked out their holiday pay by reference to the last 12 weeks worked by that person.

From 6 April 2020 they calculate the holiday pay of a person who has worked at least 52 continuous weeks by reference to their last 52 worked weeks (not counting weeks in which they were not paid), looking back up to a maximum of 104 weeks.

If a person has not worked 52 weeks, holiday pay is calculated by reference to the weeks they have actually worked.

The aim is to reduce the likelihood that holiday pay is vulnerable to short-term variations in pay for workers with variable hours – for example, if a holiday is taken after a particularly busy or quiet period.

Overtime must be factored into the calculation of holiday pay if the employer is contractually obliged to work overtime, or if it is voluntary but sufficiently regular to be treated as part of the person’s normal pay.

Operative date

• 6 April 2020

Recommendation

• Employers should plan and budget for changes to the way holiday pay is calculated for workers who do not work fixed hours.