Learn the latest facts about holiday pay
There’s still some speculation about holiday entitlement and pay after a new law came into effect earlier this year, so here’s a quick update on the main talking points
As you may be aware, the Retained EU Law (Revocation and Reform) Act 2023 was introduced on 1 January 2024, and since then we’ve received a number of queries about the changes and their impact on Member businesses.
To help keep you in the picture, here are some of the most common questions we’ve been asked about holiday entitlement and pay.
What is the current statutory holiday entitlement?
Employees will continue to receive a statutory entitlement of four weeks/20 days of paid holiday leave under the EU Working Time Directive, with an additional 1.6 weeks/eight days of paid holiday leave under UK domestic rights.
Four weeks will be paid as ‘normal pay’, and 1.6 weeks paid at ‘basic pay’, and an employee will accrue holiday days at a rate of 2.33 days per month.
What is basic pay and normal pay?
Basic pay is the salary rate or hourly rate that applies to the employee. Normal pay will reflect basic pay and will include:
Payments intrinsically related to performance, i.e. commission
Payments related to status or length of service, e.g. Responsibility Money
Regular bonuses and regular overtime.
An employer must reasonably determine what is classed as ‘regular’ when considering if a bonus or overtime applies. You should consider if these factors occur weekly, monthly or seasonally, or if it’s expected as a matter of normal practice.
How do you calculate average weekly earnings?
Average weekly earnings should be calculated as per the diagram shown above right. If an employee has worked less than 52 weeks, please use the number of weeks applicable.
Employees with fixed salary and hours should receive the same pay while on holiday leave as they would while working.
When can holidays carry over into the next year?
An employee on family leave can carry over 28 holiday days into the next calendar year. An employee who cannot use their holiday entitlement due to illness absence can carry over a maximum of 20 days, to be used within 18 months of the accrual year.
A significant change under the new legislation means that if an employee isn’t aware that they’ll lose untaken holiday days at the end of the holiday year, or if they’re not granted leave or given opportunity to use their holiday entitlement during the holiday year, the remaining holiday days MUST carry over into the next holiday year.
Holidays can be carried over if agreed between employee and employer, or if the company policy states this is the case. Company policy cannot offer LESS than the statutory requirements.
What does this mean for companies that follow the SJIB National Working Rules?
The Scottish Joint Industry Board (SJIB) takes consideration of the statutory requirements and offers an enhanced holiday entitlement per year. The above-mentioned guidance for calculating average weekly earnings applies.
What about irregular hours and part-year workers?
There has been substantial change to holiday entitlement and calculation of holiday pay for employees who work irregular hours or who work part-year.
If this applies to your company, please consult gov.uk’s published guidance Holiday pay and Entitlement Reforms from 1 January 2024, which can be download by going to bit.ly/hols-pay
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