Holiday Pay (On-Call)

New Method of Calculation

The UK’s holiday pay reference period for variable working hours will change in 2020.

Under the current system, those types of employees can be disadvantaged by taking holiday after quieter periods of work. From 6 April 2020, The Employment Rights (Employment Particulars and Paid Annual Leave) (Amendment) Regulations 2018 will introduce rules to address that disadvantage. With that date approaching, employers should take steps to implement the necessary changes in their payroll.

What will change?
From 6 April 2020 the reference period for calculating holiday pay for variable hours workers will increase from 12 to 52 weeks.
The 52-week reference period will function in the same way as the previous 12-week period:
  • Employers must count back across the last 52 weeks that the employee has worked, and received pay.
  • Weeks in which no pay was received will not be counted towards the 52-week average.
  • In situations where employees have worked for less than 52 weeks, employers should use as many full weeks of work as possible to calculate holiday pay.
  • Contractually obliged overtime worked during the reference period must also be included in holiday pay.

The purpose for the change is that it often puts workers at a disadvantage who work variable hours, especially when they take their leave after quieter periods of work. Similarly, employers will encourage their employees to take leave in these quieter periods: both issues have implications for equality and fairness in the workplace.