What businesses need to know about recent updates to payroll

The Department for Business and Trade has recently released feedback on two major consultations concerning payroll and holiday entitlements. 

Changes in holiday entitlement calculation 

The Government has opted against adopting a 52-week reference period for holiday entitlement.  

Now, the calculation of holiday entitlement for workers with irregular hours or those working part of the year will be based on 12.07 per cent of the hours worked during a pay period.  

This adjustment simplifies the process for businesses with employees who lack a consistent work schedule. 

Preservation of current holiday pay rates 

The current structure of holiday pay, under Regulation 13 and Regulation 13A, will continue. Workers will still receive: 

• Four weeks of holiday at their usual pay rate 
• An additional 1.6 weeks of holiday at their basic pay rate 

This decision maintains consistency and clarity for both employers and employees. 

Introduction of rolled-up holiday pay 

Rolled-up holiday pay will be allowed, but exclusively for employees with irregular hours or those who work part of the year. This modification introduces greater flexibility for businesses in managing holiday pay for these types of employees. 

Timeline and legal requirements for implementation 

There are no specific dates set for implementing these changes, as they require legal action.  

Businesses should remain look out for further updates and be ready to modify their payroll systems once these changes are legislated. 

Influence and anticipation from the CIPP 

The Chartered Institute of Payroll Professionals (CIPP) has significantly influenced these updates, with many of their recommendations being adopted by the Government.  

However, both the CIPP and businesses must await further instructions and documentation from the Government regarding the practical application of these changes. 

Impact on your business 

These changes mean businesses will need to make adjustments in calculating and paying holiday entitlements, particularly for employees working irregular hours or part of the year. 

Staying updated and prepared 

We advise regularly consulting the CIPP’s policy hub and other trustworthy sources for the most recent information and guidance. Being well-informed is crucial for seamless payroll operations and legal compliance. 

For any queries or assistance in adapting to these new payroll updates, please reach out to us.