The Government has announced changes to the rules surrounding holiday pay for irregular hours and part-year workers, which will come into effect from April 2024. In this article we’ll look at how this affects umbrella company employees.
Holiday pay for those working part year or irregular hours
The Supreme Court’s decision in the Harpur Trust v Brazel case highlighted inconsistency in the current legislation, when they ruled that holiday pay entitlement could not be reduced pro-rata to reflect the actual hours worked. This could result in part-year workers receiving more holiday pay entitlement than part time workers who worked the same number of hours across the whole year.
Under the new legislation statutory holiday pay entitlement will be calculated at 12.07% of hours worked, capped at 5.6 weeks.
Rolled up holiday pay
“Rolled up” holiday pay is the practice of paying holiday pay along with normal pay, rather than when the worker takes leave. In 2006 the European Court of Justice ruled this practice to be unlawful, citing concerns that it could disincentivise workers from taking holiday. 45% of respondents to the Government’s recent consultation shared these concerns and did not support rolled up holiday pay.
As a result of this mixed response, rolled up holiday pay will be allowed under the new legislation, but only for part-time workers and those with irregular hours. This will include umbrella company employees, as they work on temporary assignments with varying hours of work.
Industry response
The contracting industry has broadly welcomed the changes as bringing much-needed clarity and fairness, and the general feeling is that “common sense” has been returned to the rules surrounding holiday pay.
Linking holiday pay with hours worked and allowing rolled-up holiday pay will make it easier for employers to comply with the law while ensuring workers get their holiday pay, and this has been greeted as a positive change.
How this affects Orange Genie’s umbrella employees
We will continue our policy of allowing our employees to choose whether their holiday pay is saved to cover time off or advanced with each salary payment, so if you’re with Orange Genie you will not notice any change. Employees who wish to change their chosen option should contact our Contractor Support team through the usual channels.
Orange Genie employees never lose their holiday pay, and it’s paid out as a standard part of our exit process if it remains unclaimed, so you will always receive your full entitlement.
It's still important to take leave
For your mental and physical wellbeing, it’s very important that you actually take time off work. This means that if you do choose not to save your holiday pay, you will need to make your own separate provision to cover time when you’re not working.
If you have questions or if we can help in any way, please call our expert team on01296 468483 or email info@orangegenie.com