As summer approaches, it's crucial that employers remember the significant changes to holiday pay regulations that came into effect for holiday periods starting on or after 1 April 2024. For employers whose leave year follows the calendar year, 2025 will be the first time these changes apply. These reforms simplified and standardised holiday pay entitlement, particularly for workers with irregular hours or part-year contracts, such as shift workers, those on term time contracts (such as school teachers) and those on zero hours contracts.

Here’s a reminder of the main changes:

1. Simplified Accrual System

For part-year and irregular hours workers, holiday entitlement usually accrues at 12.07% of the hours worked in each pay period Employers should ensure that this accrual method is accurately reflected in their payroll systems and communicated clearly to affected employees.

2. Introduction of Rolled-Up Holiday Pay

Employers have the option to pay holiday pay upfront alongside regular wages, known as "rolled-up" holiday pay. This method involves adding an additional 12.07% to each pay period's earnings, rather than paying holiday pay when workers actually take annual leave. Whilst this simplifies administration, it's essential that payslips itemise this amount separately, and that employers ensure that employees still take their full annual leave.

3. Extended Carry-Over Provisions and Long-Term Sickness

Unused annual leave (up to 5.6 weeks) incurred due to family-related absences can now be carried over to the next holiday year. This applies to leave taken for reasons like parental leave or caring for dependents. Long-term sick leave can also be carried forward and used for up to 18 months after the end of the holiday year it accrued, offering employees added flexibility.

Actions employers should be considering

To ensure continued compliance, employers should:

•              Review payroll systems to ensure they reflect the accrual methods

•              Clearly communicate changes to affected workers

•              Maintain accurate records of holiday accruals and usage

•              Encourage workers to take their full holiday entitlement.

This article reflects the position at the date of publication. If you are reading this at a later date you are advised to check that that position has not changed in the time since. 

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