In April 2020 the statutory reference period for holiday pay is set to change from 12 weeks to 52 weeks. For employers, this means that the way in which holiday pay is calculated, and possibly also the amount that employees are paid for holidays, will change.
Myhrtoolkit has a Variable Hours system for flexible hours employees. Users automatically accrue holiday based on a percentage of the hours that they work, as entered by managers.
How will the change affect myhrtoolkit’s Variable Hours system?
For users of myhrtoolkit’s Variable Hours system, holiday is calculated on the basis of accrued entitlement, rather than pay, so nothing will change within myhrtoolkit. This means that we calculate accrued holiday entitlement based on how many hours the variable hours employee has worked over the holiday year (which typically runs from January - December, but may differ depending on the organisation). Holiday entitlement for variable hours employees will continue to be calculated according to the total number of hours the employee works during the holiday year.
If an employee requests more holiday than they have accrued myhrtoolkit will provide the manager with an estimate of whether they are likely to accrue the requested amount of holiday by the end of their holiday year. It is then up to the discretion of the manager as to whether to grant the holiday request.
If the employee has only worked a few weeks prior to their holiday request, myhrtoolkit will display a message advising just that their request is in advance of their current accrual.
Changes to payroll
In summary, then, the upcoming changes to the holiday pay reference period will not directly affect users of myhrtoolkit who are managing employees on flexible hours contracts. Holiday entitlement will continue to be calculated as it was before. Employers should however be aware that the change to payment reference period will affect payroll, since a change to the holiday pay reference period means that the amount that a flexible hours employee is paid for holiday will be calculated according to a new average - either 52 weeks for employees who have worked for at least this amount of time, or for however many weeks they have worked for if they have been working less than this amount of time.
Written by Kate Taylor
Kate is a Content Marketing Executive for myhrtoolkit. She is interested in SaaS platforms, automation tools for making HR easier, and strategies for keeping employees engaged.