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Understanding what counts towards holiday pay has been a tricky subject for years, but with the latest updates to the Working Time Regulations 1998, things have become a little clearer. Here’s a rundown of five things you need to know about holiday pay in 2024:

  1. What Needs to Be Included: From January 1, 2024, statutory holiday (4 weeks of holiday pay each year) must be paid at ‘normal pay’ which should include:
    • Payments (like commission) which are intrinsically linked to job performance.
    • Payments related to status, like length of service, seniority, or professional qualifications.
    • Other payments (like overtime) regularly made in the past 52 weeks.
  2. Statutory vs. Additional Holiday:
    • Statutory holiday is 4 weeks a year. The UK minimum holiday entitlement is 5.6 weeks per year. The extra 1.6 weeks and any additional days offered by your business can be paid at basic rate. There are slightly different rules for irregular hours and part-year workers.
  3. Fixed vs. Variable Pay:
    • If an employee has regular hours and fixed pay, holiday pay should match what they normally earn.
    • For variable hours or pay, holiday pay should be calculated based on an average of earnings over the past 52 weeks.
    • For irregular hours or part-year workers, employers can use rolled-up holiday pay.
  4. Irregular Hours and Part-Year Workers:
    • These workers get holiday pay based on ‘normal pay’ rates for the full 5.6 weeks – either through rolled-up holiday pay or an equivalent calculation.
    • Holiday pay is treated as a single pot and is not split into 4 weeks statutory and 1.6 additional weeks.
  5. No Pay in Lieu During Employment:
    • Employees can’t be paid instead of taking their holiday during employment. They must take the actual holiday time.
    • When an employee leaves a job, any unused holiday can be paid out in lieu.

Find out how we can help.  Our partner, Jon Dunkley, heads the Wollens specialist Employment Department.  Contact him today for an informal chat, without obligation on 01271 342268 or via email at [email protected].