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Simplified holiday pay calculation system comes into force

by Rima Evans
19 January 2024

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Simpler rules on calculating holiday pay entitlement for part time or irregular hours workers have been introduced at the start of this year, GP practices are being reminded.

The reforms mean employers will go back to the previous system where holiday entitlement accrues at 12.07% of hours worked in each pay period (the frequency at which workers get paid), also called the 12.07% method.

This will apply for holiday years beginning on or after 1 April 2024.

The standard way for employers to calculate holiday pay was changed in 2022 following a Supreme Court ruling in the case of Harpur Trust v Brazel, which involved a term-time music teacher on a zero hours contract.

The court judged that every worker, including those that work only part of the year, should receive at least 5.6 weeks’ paid holiday matching the entitlement of employees who work all year round.

It also ruled that the 12.07% method to calculate holiday entitlement, common practice among employers, should no longer be used.

This forced organisations, including GP practices, to switch to a more complex – and in some cases, unfair – way of calculating holiday called the calendar week method.

However, following a consultation carried out by the Department for Business, Energy and Industrial Strategy last year, the rules have reverted back to employers being able to use the 12.07% method.

New provisions in The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023, which came into force on 1 January 2024, also mean that rolled up holiday pay is allowable again for part year and irregular hours workers that want to be paid for any accrued holiday rather than take it.

And also from 1 January, workers can no longer accrue Covid carryover leave.

Under a temporary rule introduced in 2020, workers could carry over untaken leave into the next two years if they could not take it because their work was affected by coronavirus.

However, that law has now been scrapped. Any Covid carryover leave accrued prior to 1 January this year must be used by 31 March 2024 or be lost.

‘Workers whose employment terminates on or before 31 March 2024 are able to claim any pay in lieu of any remaining entitlement they were unable to use due to the effects of coronavirus,’ Government guidance has said.

Liz Willett Chartered MCIPD, head of business partnership at Kraft HR Consulting Ltd said the change to the way holiday pay is calculated is important news for GP practices.

‘The 12.07% is a return to a more straightforward method of calculation and the permitting of rolled up holiday pay is a step further. ‘

She warned that where practices do use rolled up holiday pay it’s important they remember that ‘the pay slip should specify holiday pay as a separate line on the pay advice’.