Effective 1 January 2024

This guidance sets out the changes to the Working Time Regulations which the government introduced on 1 January 2024.

Scope and Definitions

• The guidance focuses on the legal minimum entitlement of 5.6 weeks’ paid holiday.
• Contractual holiday entitlement: Many workers have contracts entitling them to additional paid holiday beyond the statutory minimum. Individual contracts should be checked first, and if necessary, independent legal advice sought.
• Calculations: All the illustrative holiday pay calculations provided in this guidance use gross pay data (before any taxes or deductions).
• 'Worker' definition: All references to ‘worker’ refer to all individuals whose employment status is either as a ‘worker’ or an ‘employee’, meaning they are entitled to paid holiday. Visit employment status for further information on employment status and definitions.

Before reading this guidance, you should check the guidance on holiday entitlement. This explains how to calculate holiday entitlement and pay for the majority of workers.

1. Introduction to WTR Reforms

The government has introduced reforms to simplify holiday entitlement and holiday pay calculations in the Working Time Regulations.

Key Changes Introduced:

• Defining **irregular hours workers** and **part-year workers** in relation to the introduction of the holiday entitlement accrual method and rolled-up holiday pay (see section 2).
• Introducing a method to calculate statutory holiday entitlement for irregular hours and part-year workers (see section 3.1).
• Introducing a method to work out how much leave an irregular hour or part-year worker has accrued when they take **maternity or family related leave or are off sick** (see section 3.4).
• Removing the Working Time (Coronavirus) (Amendment) Regulations 2020 which affect the accrual of **COVID-19 carryover of leave** (see section 4.1).
• Maintaining the current rates of holiday pay where 4 weeks is paid at normal rate of pay and 1.6 weeks paid at basic rate of pay, whilst retaining the 2 distinct pots of leave (see section 5.1).
• Defining what is considered **‘normal remuneration’** in relation to the 4 weeks of statutory annual leave (see section 5.1).
• Introducing **rolled-up holiday pay** as an alternative method to calculate holiday pay for irregular hours workers and part-year workers (see section 5.2).

2. Definition of an Irregular Hour Worker and a Part-Year Worker

A definition for irregular hours workers and part-year workers has been set out in regulations so that employers know which workers the accrual method for entitlement and the introduction of rolled up holiday pay apply to. Employers should ensure working patterns are clear in their workers’ contracts. (Note: a pay period is how frequently a worker gets paid, for example, monthly.)

2.1 Irregular Hours Worker

A worker is an **irregular hours worker**, in relation to a leave year, if the number of paid hours that they will work in each pay period during the term of their contract in that year is, under the terms of their contract, **wholly or mostly variable**.

2.2 Part-Year Worker

A worker is a **part-year worker**, in relation to a leave year, if, under the terms of their contract, they are required to work only part of that year and there are periods within that year (during the term of the contract) of at least a week which they are **not required to work and for which they are not paid**.

3. Holiday Entitlement for Irregular Hours Workers and Part-Year Workers

3.1 How Statutory Holiday Entitlement is Accrued

For workers who are not irregular hours or part-year workers, there is no change in how their statutory holiday entitlement is accrued (pro-rating).

• For leave years that begin before 1 April 2024, holiday entitlement will continue to be calculated in the same way for irregular hours and part-year workers. Use the holiday entitlement calculator to work out entitlement.
• For leave years beginning on or after 1 April 2024, there is a new accrual method for irregular hour workers and part-year workers in the first year of employment and beyond. Holiday entitlement for these workers will be calculated as 12.07% of actual hours worked in a pay period.

The **12.07% figure** is based on 5.6 weeks’ leave, meaning a worker’s total working weeks in a year is 46.4 (52 minus 5.6). 12.07% of 46.4 is 5.6.

Note on Higher Contractual Entitlement: To find the relevant percentage for workers entitled to more than the minimum (e.g., 6 weeks), use the calculation: (total holiday entitlement ÷ remaining working weeks in the year) x 100.

Agency Workers: The accrual method applies to an agency worker if their arrangements fall within the meanings of both a “worker” and either an “irregular hours worker” or a “part-year worker”. Otherwise, the agency worker will continue to accrue leave at one twelfth of their entitlement at the start of each month during their first year of employment.

Statutory paid holiday entitlement is limited to 28 days (e.g., staff working 6 days a week are only entitled to 28 days’ paid holiday).

3.2 Leave Entitlement When Leaving a Job Part-Way Through a Leave Year

Any shortfall between leave accrued and leave taken should be paid in lieu of untaken leave. Statutory annual leave entitlement can be calculated as:

$$\text{Leave entitlement for full year} \times \text{Proportion of leave year in employment}$$

This is calculated in a 3-step method:

1. Calculate the worker’s full annual leave entitlement.
2. Work out the proportion of the leave year in employment.
3. Pro-rate based on the proportion of the year in employment.

3.3 Hours Worked Per Week (Fixed Hours)

Where workers work a fixed number of hours each week but not the same number of hours each day, the cap should be incorporated as 28 days of the worker’s average working day. Statutory leave entitlement should be calculated in days, and then multiplied by the average length of the working day:

$$\text{Average working day} = \frac{\text{Hours worked per week}}{\text{Days worked per week}}$$

Workers who leave employment have their annual leave pro-rated based on the time that they spent in work as a proportion of the year (based on calendar days in employment, not days spent at work). This is calculated in a 4-step method:

1. Calculate the worker’s full annual leave entitlement.
2. Work out the proportion of the leave year worked.
3. Pro-rate based on the proportion of the year worked.
4. Multiply by the average working day to convert into hours.

3.4 Calculating Statutory Holiday Entitlement Accrued by Irregular Hours and Part-Year Workers While on Statutory Leave or Off Sick

For leave years beginning on or after 1 April 2024, a calculation method has been introduced for irregular hours and part-year workers on **maternity or family related leave** (statutory leave) or off sick.

• The method uses a **52-week relevant period** (look-back period) to work out an average of hours worked to determine accrued leave during the absence.
• The relevant period runs from the day before the worker starts their leave or sickness, going back 52 weeks.
• Weeks where the worker is on statutory leave or off sick for any amount of time should be excluded when calculating the average weekly hours worked. Weeks not worked for any other reason should be included.
• The calculation is only required once per period of leave.

Multiple Leave Periods: If a worker takes multiple periods of statutory leave or is off sick multiple times within the 52-week relevant period, the calculation may need to go back further than 52 weeks, up to 104 weeks, excluding all previous statutory leave or sickness periods.

4. Carryover of Leave

From 1 January 2024 the following principles relating to the carryover of annual leave apply.

General Carryover Rules

• Workers can normally carry over a maximum of 8 days into the next leave year, with the agreement of their employer.
• If a worker gets more than 28 days’ leave, their employer may allow them to carry over any additional untaken leave (check the employment contract).

Specific Carryover Circumstances

A worker may be entitled to carry forward leave if they were unable to take it due to:

• Maternity or other family related leave: up to 28 days of untaken leave carried forward to the following leave year.
• Sickness (regular hours/all year round): up to 20 days of untaken leave carried forward, provided it is taken within 18 months starting from the end of the leave year in which it was accrued. These 20 days should be paid at the ‘normal’ rate.
• Sickness (irregular hours/part-year): up to 28 days of leave carried over, to be used within 18 months starting from the end of the leave year in which it accrued.

An employer must allow a worker who is unable to take their statutory holiday entitlement as they are on maternity or other family related leave to carry over all their holiday entitlement to the following leave year.

A worker will also be entitled to carry forward untaken leave if:

• The employer has refused to pay a worker their paid leave entitlement.
• The employer has not given the worker a reasonable opportunity to take their leave and encouraged them to do so; or
• The employer failed to inform the worker that untaken leave will must be used before the end of the leave year to prevent it from being lost.

4.1 Leave Affected by COVID-19

• From 1 January 2024, workers can no longer accrue COVID carryover leave.
• Workers will still be able to use the leave they accrued prior to 1 January 2024 before or on 31 March 2024.
• Workers whose employment terminates on or before 31 March 2024 are able to claim any pay in lieu of any remaining entitlement they were unable to use due to the effects of coronavirus.

5. Holiday Pay Calculations

5.1 Holiday Pay Rates and Components

All full-year workers are legally entitled to 5.6 weeks of paid statutory holiday entitlement per year, split into two pots:

• 4 weeks: Must be paid at a worker’s **‘normal’ rate of pay** (Regulation 13).
• 1.6 weeks: Can be paid at **‘basic’ rate of pay** (Regulation 13A).

Many employers choose to pay the entire 5.6 weeks at the ‘normal’ rate of pay. Holiday pay should reflect what the worker would have earned if they had been at work and working.

From 1 January 2024, the components which must be included when calculating ‘normal’ rate of pay are defined in regulations:

• Payments, including commission payments, intrinsically linked to the performance of tasks which a worker is contractually obliged to carry out.
• Payments relating to professional or personal status relating to length of service, seniority or professional qualifications.
• Other payments, such as **overtime payments**, which have been regularly paid to a worker in the 52 weeks preceding the calculation date.

Fixed Pay Workers: Workers with regular hours and fixed pay must receive the same holiday pay as the pay they would receive if they were at work and working.

Part-Year and Irregular Hours Workers (from 1 April 2024): If their employer chooses to use **rolled-up holiday pay**, then the entire amount of their leave will be paid at the ‘normal’ rate of pay.

5.2 Rolled-Up Holiday Pay

Rolled-up holiday pay allows employers to include an additional amount with every payslip to cover a worker’s holiday pay. This is an alternative method for calculating holiday pay for irregular hour and part-year workers only, for leave years beginning on or after 1 April 2024.

• Calculation: The holiday pay is 12.07% of a worker’s total pay in a pay period.
• Transparency: The payment must be clearly marked as a separate item on each payslip and paid at the same time as the worker is paid for the work done.
• Conditions: Rolled-up holiday pay must be paid in addition to the worker’s normal salary, which should be at National Minimum Wage or above.

If a worker who receives rolled-up holiday pay goes off sick or takes statutory leave, their rolled-up holiday pay would be calculated according to average amount of the worker’s total earnings in each pay period during the 52-week relevant period.

5.3 A 52-Week Reference Period to Calculate Holiday Pay

Where a worker has irregular hours or works part of the year, employers can continue to use the existing method of calculating their holiday pay using an average from the **last 52 weeks in which they have worked and have earned pay**.

Key Rules for the 52-Week Reference Period

• Insufficient Data: If a worker has less than 52 weeks of pay data, use however many complete weeks of data they have. If a worker takes leave before they have been in their job a complete week, the reference period is not used; the employer should pay an amount which **fairly represents their pay**.
• Look-Back Cap: To prevent employers having to look back more than 2 years to reach 52 weeks’ of pay data, there is a cap on how far back employers should look: no more than 104 complete weeks prior to the first day of the worker’s holiday.
• Weeks to Include: The reference period must only include weeks for which the worker was actually paid. It must exclude weeks where they were not paid as they did not work, or any weeks with time off sick or on maternity/family-related leave.

5.5 Payment in Lieu

If an irregular hour worker or part-year worker does not take their accrued holiday entitlement by the time they leave employment, they should be paid for this untaken holiday (known as ‘payment in lieu’).

• The payment is calculated by working out the individual’s remaining holiday entitlement and then working out their holiday pay for this period, deducting any holiday already taken.
• The holiday pay for the leave accrued should be calculated using an **average of the 52-week reference period** (or shorter period of employment/paid weeks).

Holiday pay and entitlement reforms from 1 January 2024 – GOV.UK (www.gov.uk)