Government to permit rolled up holiday pay for workers on part-year contracts or irregular hours

Published Nov 17, 2023

Over the last year the government has been looking at ways to simplify holiday pay rules and dispense with EU law. It has now confirmed plans to implement law that will allow employers to pay workers with irregular hours or on a part-year contract an additional sum to cover holiday pay each month.

This so called “rolled up” holiday pay is currently unlawful after a ruling in 2006 by the European Court of Justice. The Court was concerned that rolled up holiday pay may have discouraged workers from taking leave as they could earn more holiday pay by staying at work.

The plans will not include a 52-week reference period nor will they apply to workers with more typical working patterns.

The government has stated that “Allowing holiday pay to be paid as an enhancement to a worker’s pay at the time that the worker performed work, instead of when they are on holiday, would ensure that the worker’s holiday pay was as closely aligned to the pay that they would have received as possible.”

It is anticipated that the accrual method of calculating holiday pay entitlement at 12.07% of hours worked will be used.

The government has also stated that under future legislation the following payments should be included when calculating holiday pay:

  1. Commission payments
  2. Overtime payments paid regularly in the 52 weeks prior to holiday being taken
  3. Payments for personal or professional status that link to professional qualifications, seniority and length of service

We are anticipating the changes will come into effect from 1st January 2024 and will update you with more details once this timeline is confirmed.