Employing irregular hours workers in the UK brings some unique challenges, particularly in calculating their holiday pay entitlement. The right to holiday pay comes from the Working Time Regulations 1998, but various court cases, including last year’s Harpur Trust v Brazel, have raised questions about part-year workers and irregular hours workers’ holiday pay entitlement.
Irregular hours workers might include zero-hours contract workers, and workers in the gig economy, although this last group’s employment status may mean they do not have the same entitlement to annual leave. Essentially it is any worker whose worked hours vary between pay periods.
The challenge lies in calculating the amount of pay owed for these holidays, as irregular hours workers typically do not have a fixed salary.
What is 12.07% holiday pay?
Anyone working in payroll or HR who has to calculate holiday pay for irregular hours workers will be familiar with the number of 12.07%. But where does it come from?
Given there are 52 weeks in a year and workers are entitled to 5.6 weeks’ annual leave then that means their working year is 46.4 weeks. Dividing 5.6 by 46.4 gives the amount of holiday pay that an irregular hours worker can accrue as a percentage: 12.07%.
If an irregular hours worker is paid an extra 12.07% on top of what they earn over 46.4 weeks, then they essentially receive holiday pay equivalent to the 5.6 weeks’ leave entitlement.
In November 2023, the government published The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023, part of which aims to simplify annual leave and holiday pay calculations under the Working Time Regulations.
While the new regulations are currently in draft form, they are expected to be laid before Parliament by the end of 2023 because the Retained EU Law (Revocation and Reform) Act will then come into force, removing various EU-derived legislation.
The regulations introduce a new formal category, “irregular hours workers”, and outline how their holiday entitlement is changing.
People who work, for example, “term-time only” are not classed as irregular hours workers, but instead as “part-year workers” under the 2023 regulations.
The regulations say an irregular hours worker is one who, in relation to the holiday year, works a number of paid hours in each pay period that is, under the terms of their employment contract, “wholly or mostly variable”.
Whereas, if a worker is a part-year worker, in relation to a holiday year, under the terms of their contract, they are required to work for only some of that year and there are periods of at least one week where they are not required to work and will not be paid.
Irregular hours workers’ holiday pay entitlement
For holiday years starting from or after 1 April 2024, irregular hours workers and part-year workers are no longer entitled to the four weeks’ annual leave and 1.6 weeks’ additional leave (totalling 5.6 weeks) that regular hours workers receive.
Instead, they receive a proportion of pay that is equivalent to 5.6 weeks. The amount of annual leave irregular hours workers are entitled at the end of a pay period during a holiday year is:
- the amount of annual leave they have accrued that year
- plus the amount of annual leave they have carried forward into that leave year
- minus any annual leave they have taken during that leave year.
Irregular hours workers
Rolled-up holiday pay to be introduced for workers with irregular hours
In a holiday year, an irregular hours worker or part-year worker accrues annual leave at the end of each pay period at the rate of 12.07% of the hours worked during that period, up to a maximum of 28 days.
So, if a worker is paid monthly and has worked 10, 20, 10, 10 and 5 hours in the respective weeks of that month, a total of 55 hours, then they would accrue 6.64 hours, or 6 hours and 38 minutes.
Fractions of an hour are rounded up if it is 30 minutes or more, so the worker would accrue 7 hours’ annual leave at the end of the pay period.
In any holiday year, the worker cannot accrue more than 28 days, but how this translates into hours is unclear and is one of several criticisms levelled at the new holiday pay regulations. If no holiday year is stipulated, it will run from their first day of employment and end after one year.
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
