A legislation change is coming into force from April 2020, which means that now more than ever holiday payments must be calculated to ensure that no employee is at a financial detriment when taking their holiday entitlement.
During periods of annual leave, workers are entitled to receive their average rate of pay (which can be different to their basic rate). This is already the case, following a number of high profile tribunal cases which have impacted on law.
However, from April 2020 the reference period in the Working Time Regulations 1998 for calculating rates of pay during periods of annual leave increases from 12 to 52 weeks. If the worker has been employed for less than 52 weeks, their holiday pay is based on the number of complete weeks they have worked.
This will apply to payments in relation to at least the first four weeks of your holiday entitlement; in line with statutory guidance. This will only affect workers whose pay varies.
The primary reason for the change is inconsistent payment of holiday pay. This is often due to fluctuations in pay because of seasonal variations. Leave following a busy period could be paid at a higher rate than leave following a quieter period. The new change should even out these peaks and troughs.