Changes to Holiday Pay from April 2020

Changes to Holiday Pay from April 2020

The right to paid annual leave is set out in the Working Time Regulations.  In recent years, a number of European Court of Justice (ECJ) decisions in relation to the operation of paid annual leave have muddied the waters for employers. Not only did the ECJ rule that paid annual leave should continue to accrue during sick leave, and can be carried over if not taken in the relevant year, but it also decided that the calculation of holiday pay should be based not just on basic pay, but on various other payments as well such as overtime and commission.

Following the Taylor review of modern working practices in July 2017, the Good Work Plan was produced and from April 2020, a number of legislation changes will come into force.  One of these changes is the way holiday pay is calculated.

From 6 April 2020, the holiday pay reference period will increase from 12 weeks to 52 weeks. Employers will be required to look back at the previous 52 weeks where an employee has worked and received pay, discarding any weeks not worked or where no pay was received, to calculate the average weekly pay. It is hoped that this change will help to even out the variation in pay for employees/ workers, particularly those in seasonal or atypical roles.

Holiday pay for additional payments will continue to be paid only on the first 4 weeks of holiday entitlement.

If you need any advice on this new piece of legislation,  please call Practical HR Ltd on 01702 216573 or email fiona@practicalhr.co.uk for advice.