The government has released new guidance on calculating statutory holiday pay for workers without fixed hours or pay in anticipation of changes coming into effect on 6th April 2020.
The guidance is focussed on the legal minimum entitlement of 5.6 weeks’ paid holiday. Many individuals will have contracts entitling them to additional paid holiday beyond the statutory minimum.
The guidance has also not been updated to take into account the Court of Appeal’s decision in Harpur Trust v Brazel  EWCA Civ 1402 so the guidance should not be relied upon for holiday pay calculations for term-time only workers.
The majority of the UK’s workforce are full-time employees on fixed hours and fixed pay. For these workers, typically on a fixed monthly salary, if they take a week’s holiday, they will receive the same pay at the end of the month as they normally receive.
The situation becomes more complicated when a worker does not work fixed or regular hours and so does not receive the same amount of pay each week, month or other pay period. In these circumstances an employer should normally look back at a worker’s previous 12 paid weeks (known as the holiday pay reference period) to calculate what that worker should be paid for a week’s leave.
The Government has legislated to change the law on holiday pay. These changes take effect from 6 April 2020, and employers should prepare for this change ahead of time.
Increasing the Reference Period: From 6 April, the reference period is increasing. Currently, where a worker has variable pay or, their holiday pay is calculated using an average from the last 12 weeks in which they worked, and thus earned pay. This reference period is being increased to 52 weeks.
If a worker has not been in employment for long enough to build up 52-weeks’ worth of pay data, their employer should use however many complete weeks of data they have. For example, if a worker has been with their employer for 26 complete weeks, that is what the employer should use.
If a worker takes leave before they have been in their job a complete week, then the employer has no data to use for the reference period. In this case the reference period is not used. Instead the employer should pay the worker an amount which fairly represents their pay for the length of time the worker is on leave. In working out what is fair, the employer should take into account:
- the worker’s pay for the job;
- the pay already received by the worker (if any);
- what other workers doing a comparable role for the employer (or for other employers) are paid.
Please use the link below to access the guidance which includes tables to explain further.
Source: GOV Guidance