Holiday pay changes in 2020

The rules are changing for holiday provision to workers on flexible or zero hours contracts

There are holiday pay changes in 2020 you need to be aware of. The legislation is changing on 6 April 2020 on the way holiday pay is calculated.

Worryingly, there is a real lack of employer and employee knowledge in how to calculate holiday entitlement. The government’s Good Work Plan provides more information, but we highlight the key changes you should be aware of.

What is the change?

Currently, to calculate the holiday pay entitlement for flexible workers, you take the average earning over the last 12 weeks – ignoring any weeks where there were no earnings – this will change to 52 weeks.

The statutory holiday entitlement of 5.6 weeks is equal to 12.07% of the total hours worked during the period.

Example:

Each week your casual employee worked 25 hours, then their holiday pay would be equal to

25 hours x 12 weeks = 300 hours x 12.07% = 36.21 hours holiday.

holiday pay changes in 2020
Payroll tip

Keep a record of this amount as at the end of the year, you can then calculate the total hours due on the whole year and then deduct any holiday payments already made.

What about overtime?

Workers on 20 hours a week, but does overtime on a regular basis. They would pay 20 hours for the holiday week, and the additional holiday pay due on the overtime is paid to the employee as and when they work.

Example 2:

Your employee works an extra 10 hours overtime at £9 per hour = £90

They would receive 12.07% of £90 = £10.83 as a holiday payment in the month the overtime was worked.

For more information

For more information on our payroll service, please contact:
Sharon Hewitt, or call us on:

01483 416232