The government has confirmed that it will reintroduce rolled-up holiday pay for workers with irregular hours or part year contracts.

This will enable employers to pay atypical workers an additional sum in respect of holiday pay each month, regardless of whether they actually took any holiday during that time.

The plans will be based on a percentage increase for such workers, and the government has confirmed that it will not introduce a 52 week holiday entitlement reference period for workers with irregular hours.

What is the current law around rolled-up holiday pay?

At present, rolled-up holiday pay is unlawful. This follows a ruling by the European Court of Justice in 2006, which expressed concerns that workers might not be incentivised to take leave, as they could earn more by being at work.

Government plans

Under the recent consultation, the government considered introducing rolled-up holiday pay as an option to all workers. However, it has decided that there is little benefit to this for workers with regular hours, and instead has decided to only apply it to workers with irregular hours and part year contracts.

What does this mean for businesses?

There is currently no date for the introduction of this change in legislation. However, if you employ staff within your business who work on a casual hours, or part-year basis, you will be able to pay their holiday (using the rate of 12.07% for statutory entitlement).

Annual leave breakdown

The statutory annual leave currently consists of two separate elements. 4 weeks (20 days) which is a European derived element, and 1.6 weeks which is the UK element for bank holidays.

The government have confirmed that the two elements will remain separate, and it does not plan to bring in a combined entitlement of 5.6 weeks.

We will keep you updated on this legislation change as more details become available. In the meantime, if you have any questions around calculating annual leave, or any other aspect of ensuring you are compliant, please contact us.