Holiday pay calculation changes

On 6 April 2020 an important change will be made

On 6 April 2020, an important change will be made to the holiday pay reference period used to calculate holiday pay.

It has generally been accepted that a 12 week reference period should be used to look back in order to calculate average holiday pay.

This addresses those weeks where monies have actually been earned.

Weeks of annual leave, sickness absence or nil earnings are excluded from the calculation as are those where an individual has been in receipt of statutory payments.

This means that you have to count backwards until the individual has twelve successful weeks of earnings.

However, this is changing from the 6 April 2020 as the government has identified that a twelve-week reference period doesn’t benefit those who work irregular and fluctuating weekly hours.

It has therefore decided to increase the reference period from twelve to 52 weeks via the Employment Rights (Employment Particulars and Paid Annual Leave) (Amendment) Regulations 2018 which will come into force on 6 April 2020.

This change means that holiday pay will need to be calculated on average hours worked over 52 weeks, not the just twelve weeks immediately preceding the worker’s holiday.

As with the old twelve-week rule, any weeks not worked are excluded from the calculation.

Where there is fewer than 52 weeks’ of pay information, you must include as many whole weeks of pay information as possible.