Holiday pay calculation changes
Successful weeks. Until now, average weekly pay for holiday pay purposes has been calculated using a twelve-week reference period. Only those weeks where monies have actually been earned are counted; weeks of annual leave, sickness absence or nil earnings are excluded from the calculation as are those where an individual has been in receipt of statutory payments. This means that you have to count backwards until the individual has twelve successful weeks of earnings.
New law. In early 2019 the government stated that this twelve-week reference period penalised those who work irregular and fluctuating weekly hours because they would invariably receive less holiday pay after quieter times. Consequently, it passed the Employment Rights (Employment Particulars and Paid Annual Leave) (Amendment) Regulations 2018 which comes into force on 6 April 2020 . These Regulations increase the holiday pay reference period from twelve to 52 weeks.
The net effect? From that date, holiday pay will need to be calculated on average hours worked over 52 weeks.
Same method. As with the old twelve-week reference period, any weeks not worked are excluded from the calculation. Where there is fewer than 52 weeks’ of pay information, you must include as many whole weeks of pay information as possible.
New and old. For new hires who haven’t worked 52 weeks, you should base your holiday pay calculations on the number of pay weeks which are available. In the event 52 weeks have been worked but they aren’t all successful weeks of earnings, you must go back further until you have 52 successful weeks’ pay to make the calculation.
Tip. Do not leave changes to the calculation of the new pay reference period until the last minute. Start preparing now and ensure you are recording all overtime worked.
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