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Holiday pay reform: are you ready?

by Kirsty Kirsty

James Sage, Employment Partner and Head of the Health and Social Care Team at RWK Goodman, talks about holiday pay reform and the implications for care providers.

The Government has published the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 which significantly change how holiday entitlement and pay can be calculated for irregular hours workers. The reforms will simplify holiday pay and entitlement calculations and are likely to be welcomed by care providers.

How did we get here?

Last year the Supreme Court decided in Harpur Trust v Brazel, that irregular hours workers are entitled to 5.6 weeks’ holiday, and do not accrue holiday entitlement on a pro rata basis in accordance with hours worked. This effectively banned the 12.07% accrual method for calculating holiday entitlement that had commonly been used in the sector and led to many workers being entitled to a greater amount of holiday.

This caused alarm in the health and social care sector where zero hours and casual worker contracts are commonplace.  Following the ruling, the Government launched a consultation to review how holiday entitlement and pay are calculated.

What is changing?

The Regulations reverse the decision of the Supreme Court in Harpur Trust and provide a statutory basis for irregular hours workers to:

  1. Accrue holiday entitlement at a rate of 12.07% of the hours worked.
  • Receive rolled-up holiday pay. This enables providers to pay workers an enhancement to their regular pay rate to reflect their holiday pay entitlement instead of them taking paid annual leave.  Workers must still be permitted to take leave, but it will be unpaid. Rolled up holiday pay has previously been ruled unlawful, so this is a significant change. However, it is not compulsory, and providers can continue to offer paid leave and calculate holiday pay by reference to average weekly pay in the 52 weeks preceding annual leave being taken.

When do the changes take effect?

The new Regulations apply to leave years which start on or after 1 April 2024. For leave years starting before 1 April, the existing rules, including the Harpur Trust ruling continue to apply.


Given the preference for a simplified and practical approach, the reforms will likely be welcomed by care providers. However, it will be important to ensure that they are implemented correctly in practice.

We recommend that providers:

  1. Decide whether to make changes to holiday entitlement and pay for irregular hours workers, taking into account potential legal risks of making changes to the contracts of existing employees and the risk that rolled-up holiday pay will disincentivise workers to take holiday as it will be unpaid, and the impact this could have on wellbeing, health and safety and staff retention.
  • Review who in your workforce meets the new definition of an “irregular hours worker” and is therefore in scope for the changes implemented under the Regulations;
  • Decide which holiday pay calculation method will be adopted;
  • Ensure payroll teams are involved in any changes and that they are reflected in your HR and payroll processes, systems, policies and workers’ payslips; and  
  • Review and update employment contracts and holiday policies irregular hours workers.



Image depicts James Sage, Employment Partner and Head of the Health and Social Care Team at RWK Goodman

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