If you’re a business with employees, it’s important to take note of the changes the government makes with respect to your staff. 

As the majority of the UK workforce are full-time employees with fixed hours and pay, the rules are pretty standard. Typically on a fixed monthly salary, if a staff member takes a week’s holiday, they will receive the same salary at the end of the month as usual. 

The rules become a little more complex for workers who are not on fixed hours and fixed pay. In an effort to combat this, in April 2020, the government will increase the holiday pay reference period from 12 to 52 weeks, in order to even out the seasonal variation in pay for many casual workers. 

In a nutshell – why the change?

This change may be in part due to a landmark ruling in the case of The Harpur Trust vs Brazel. In this case, the court of appeals ruled that a worker on a permanent employment contract who only worked for part of the week, or part of the year – such as a music teacher – should have their holiday pay calculated differently to a part-time employee who works year round.

Ms Brazel, a visiting music teacher herself, was employed by Bedford Girls School on a zero-hours contract. Brazel said that the ‘casual workers holiday pay’ recommended by Acas was unfair, by calculating her earnings at the end of each term and paying her one-third of 12.07% of the figure. She maintained that this method of calculation produced a lower figure than required by the working time regulations. 

What you need to know

The reference period for calculating holiday pay for variable hours workers is increasing from 12 to 52 weeks from April 2020. 

If you have in-house payroll staff, they’ll need to be trained in the new rules, though the 52 week reference period will function in much the same way as the 12 week period:

  • They will need to calculate the amount an employee has worked and received pay across the last 52 weeks.
  • Weeks in which the employee wasn’t paid over that time will not count towards the 52 week average. Agreed overtime worked during the reference period will be included. 
  • In the case you have an employee who has worked for you less than 52 weeks, you must use as many full weeks of work as available to calculate the holiday pay. 

What you can do to prepare

The government will likely produce more guidance on these rules in the coming months. 

In the meantime, if you have internal systems that need to be changed in order to accommodate the new rules, now would be the time to look at those, ahead of April 2020. 

If you’re confused by payroll legislation (of any kind) and how these changes will affect your business, or you’d like the stress of running payroll taken off your shoulders completely, we’re always here to support you. 

Find out where your nearest Saint & Co offices are to get in touch.