Payroll reform

From 6 April 2020, the way that holiday pay is calculated for workers on variable remuneration or zero hours contracts is changing and employers are advised to take action in advance of the change.

Normally, holiday pay is calculated using an employee’s usual pay rate, however, if an employee doesn’t have fixed or regular hours or their pay varies, employers must work out their average pay using what’s known as the holiday pay reference period.

Currently, this is 12 weeks for workers who’ve been employed for 52 weeks or more, and for those on less than 52 weeks, it’s the number of weeks that the worker has been employed with their current employer.

What’s changing and why?

From 6 April 2020 the holiday pay reference period for employees who’ve worked 52 weeks’ or more is increasing from 12 weeks to 52 weeks.

The change is being made to reflect the hours worked by casual employees, or those on zero hours contracts, more accurately and reduce peaks and troughs in pay for seasonal workers.

What businesses need to do?

Employers should ensure they have payroll records for 52 weeks prior to the 6 April 2020 for all eligible employees and continue to maintain these records going forward. As with the previous system, keeping accurate records is vital as any errors will impact on an employee’s pay.

The government plans to publish detailed guidance for employers on how to calculate holiday pay, as well as making them aware of holiday pay entitlements.

Other Changes

Parental Bereavement Leave

Another change coming into force from 6 April 2020 onwards is Parental Bereavement Leave. This will entitle all working parents up to two weeks’ paid leave if they lose a child under the age of 18 or have a stillbirth after 24 weeks of pregnancy.

Parents can choose to take the leave as one block of two weeks’ paid leave, or two blocks of one week, so long as the leave is taken within 56 days’ of losing their child.

Minimum wage

Lastly, the National Minimum Wage and National Living Wage rates are going up from 6 April 2020, with the National Living Wage rising from £8.21 to £8.72. For further information on the rates increases, please visit: https://www.gov.uk/national-minimum-wage-rates

If you have any queries or would like advice on any of the changes mentioned, please contact Rob Tompkins on 01225 325580 or email rt@richardsonswift.co.uk.