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Government updates guidance on calculating holiday pay

The government's guidance on how to calculate holiday pay for workers without fixed hours or pay has been updated to refer to the new 52-week reference period introduced by the Good Work Plan.

 

The revised guidance explains the following key changes implemented on 6 April 2020:

  • Employers must now use 52 weeks' worth of pay data to calculate holiday pay for workers without fixed hours or pay, instead of 12.
  • Where a worker does not have 52 weeks' worth of pay data, the employer should use however many weeks they have. If a worker takes holiday before they have worked a full week, the employer should pay the worker an amount which fairly represents their pay for the length of time they are on leave. In working out what is fair, an employer must consider the worker's pay, the pay they have already received and what is paid to other workers doing a comparable role for the employer.
  • It is still the case that weeks in which the worker receives no pay are excluded from the reference period, and earlier weeks in which pay was received will be counted instead, even if this takes the employer back more than 52 weeks. However, employers are not required to look beyond a 104-week limit to achieve 52 weeks' worth of pay data. If the worker does not have 52 weeks' worth of pay data within the preceding 104 weeks, the reference period is shortened to however many weeks of data are available in the 104-week period.

 

As before, the guidance goes on to provide details of how to use the new reference period to calculate holiday for different types of worker (including temporary workers and workers with irregular hours or on zero-hours contracts), as well as to tackle some other potential areas of difficulty. For example, it explains that in most cases it will not be possible to use 12 months' pay data for employees who are paid monthly on a variable rate, since this will not necessarily correspond with the 52-week period.

 

While the law surrounding holiday entitlement and pay for workers without fixed hours or pay can be fraught with difficulty, the updated guidance will hopefully provide a useful starting point for employers and practitioners navigating the new provisions.

 

Link to the guidance: Department for Business, Energy and Industrial Strategy: Guidance: Calculating holiday pay for workers without fixed hours or pay, GOV.UK (updated 6 April 2020).

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