Summer holiday season is upon us, and as well as the task of juggling annual leave requests in a way that keeps everyone happy, employers will also need to make sure that they have their holiday pay procedures sorted out. One of the things that can often cause employers some real headaches is what to do about part-year employees or those who work irregular hours. One solution is rolled-up holiday pay.
This is where employers include an employee’s annual leave entitlement within their basic pay instead of paying them when they actually take the annual leave. This means the employee will receive an increased hourly rate, avoiding confusion when it comes to calculating a part-year or irregular hours employee’s holiday entitlement.
Who does this affect?
Part-year workers or those who work irregular hours can be paid rolled-up holiday pay. Some agency workers may also be covered if they have those work patterns.
A part-year worker is someone whose contract states:
- they only have to work part of the year;
- there are periods of at least a week when they are not required to work and which they are not paid for.
Their contract will be in place all year, even when they aren’t working – something both the worker and the employer need to bear in mind.
A part-year worker might include teachers who work during term-time only or seasonal workers.
Irregular hours workers are those who work a mostly variable number of paid hours in each pay period. This can’t be an informal arrangement – it must be clearly stated in their employment contract. If a worker has fixed hours but works irregular days, they won’t be included in this definition.
How do you calculate rolled-up holiday pay?
This is worked out by taking 12.07% of the hours the worker works in a ‘pay period’ (whether that’s per week or per month).
It’s paid at the same time as the worker is paid for the work that has been done in that period.
Using this method means that the rolled-up holiday pay is kept in line with that of a regular full-time worker. It also provides accuracy and helps to make the calculation process for employers easier.
What to do
Employers need to make sure that they understand the definitions of part-year workers and those who work irregular hours to ensure they know who is eligible for rolled-up holiday pay. They also need to make all eligible employees aware that they will receive it.
When issuing pay slips, it’s important to mark the rolled-up holiday pay separately so it can be identified as such.
When discussing pay with affected employees, the employer needs to make it clear that they will not be paid for any annual leave they take as this will be included within their basic pay.
No matter what category they fall into, employees still need to take at least 5.6 weeks annual leave within the 52-week year.
Employers will also need to review their policies on annual leave to ensure they are compliant with the rules, and employment contracts for any part-year workers or those who work irregular hours.
