HOT TOPIC
Apprentices Employers commonly assume the
entitled to 5.6 weeks of paid statutory holiday per year. However, under the new legislation, the calculation of holiday pay (referred to as the ‘normal’ rate of pay) for the first four weeks’ holiday must now account for the following payments a worker has received:
must be considered, and only for the first four weeks’ annual leave. Employers now have the option of lawfully implementing rolled-up holiday pay for IH and PY workers and can pay this at 12.07% of all remuneration earned by the worker in the pay reference period. This must be paid in the pay period in which the worker is paid for the hours they worked. Compliance steps to take ● identify the categories different workers fit into for holiday pay purposes ● check your annual leave year and when the IH / PY definition will begin to apply ● review the pay components paid to workers to establish which ones must be included in the holiday pay calculations and for what amount of holiday, whether
apprenticeship rate is applicable for the entirety of an employee’s apprenticeship. However, this rate is applicable only to apprentices under the age of 19, and for apprentices who are 19 and over in the first year of their apprenticeship only. Employers should have controls in place to identify when the apprenticeship commenced and when it will end, to ensure pay rates are adjusted accordingly throughout the course of the year. With the increased focus from HMRC on geographic and sector-based targeted enforcement, NMW compliance should be a priority for all employers. HMRC can impose a 200% penalty of all underpayments of NMW identified over the previous six years, plus there’s the potential reputational damage of naming and shaming for any breaches of the NMW for employers to consider.
● payments, including commission payments, intrinsically linked to the
performance of tasks which the worker is obliged to carry out under their contract ● payments for professional or personal status relating to length of service, seniority or professional qualifications ● payments, such as overtime payments, which have been regularly paid to a worker in the 52 weeks preceding the calculation date. The remaining 1.6 weeks’ entitlement can be paid at the ‘basic’ rate of pay. New definition of irregular hours (IH) and part-year (PY) workers Two new definitions have also been introduced: IH workers and PY workers, which can be found here: https://ow.ly/ mNnW50R8nqq. These definitions will only have significant relevance for leave years starting on or after 1 April 2024. From that date, holiday entitlement for IH and PY workers can be measured in hours rather than weeks, accruing at a rate of 12.07% of the hours worked in a pay period. This method ensures a fair calculation of holiday entitlement for workers whose hours fluctuate throughout the year and reverses the recent decision from the case of Harpur Trust v Brazel. An important distinction between IH / PY workers and all other workers is that all remuneration must be included in the holiday pay calculation for all 5.6 weeks for IH / PY workers. For all others, it’s only those payments listed further above which
it be for four weeks or 5.6 weeks ● update human resource (HR) and payroll systems to ensure the
Although these changes hopefully bring clarity and fairness to holiday entitlement and pay calculations, employers must adapt their practices accordingly. Understanding the new regulations, communicating effectively with employees and implementing necessary adjustments will mean that employers can ensure compliance and maintain a positive working environment for their workforce. n calculations are completed compliantly, that the correct data is captured by HR and shared with payroll (for example, dates of annual leave, sickness absence or statutory leave) so payments are calculated correctly and made to workers at the correct time ● introduce a policy to explain to workers how holiday entitlement and pay is calculated in accordance with the legislation.
HOLIDAY PAY In January 2024, new legislation was introduced which affected how holiday entitlement and pay must be calculated for workers in the UK. Some of it took effect straight away with other rules coming into effect for holiday years beginning on or after 1 April 2024. Calculation of holiday pay for salaried workers Almost all people classed as workers are
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| Professional in Payroll, Pensions and Reward |
Issue 100 | May 2024
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