What business owners need to know about the latest payroll updates

The Department for Business and Trade recently published responses to two significant consultations regarding payroll and holiday entitlements.

Holiday entitlement reference period

The Government has decided not to proceed with the proposal to introduce a 52-week holiday entitlement reference period.

Instead, holiday entitlement for irregular hours and part-year workers will now be calculated as 12.07 per cent of hours worked in a pay period. This change simplifies the calculation for businesses with employees who do not have a fixed working pattern.

Maintenance of two rates of holiday pay

The existing two rates of holiday pay, as per Regulation 13 and Regulation 13A, will be maintained. This means workers will continue to receive:

  • Four weeks of holiday at their normal rate of pay
  • 6 weeks of holiday at their basic rate of pay

This decision to maintain the status quo ensures clarity and continuity for both employers and employees.

Rolled-up holiday pay

Rolled-up holiday pay will now be permissible, but only for irregular hours and part-year workers. This approach allows more flexibility for businesses in managing holiday pay for employees who do not have regular working hours.

Implementation and legislative intervention

It’s important to note that there are currently no specific implementation dates for these changes, as many require legislative intervention. This means businesses should stay alert for further updates and be prepared to adjust their payroll systems accordingly once these changes are enacted.

The CIPP’s role and response

The Chartered Institute of Payroll Professionals (CIPP) has played a crucial role in shaping these updates.

Many of the suggestions and recommendations put forward by the CIPP have been accepted by the Government.

However, the CIPP and businesses alike must now wait for further guidance and documentation from the Government on how these changes will be implemented in practice.

What this means for your business

As a business, it’s crucial to understand how these changes impact your payroll processes. The updates bring about a need for adaptation in the way holiday entitlements are calculated and paid, especially for part-year and irregular hour workers.

Stay informed and prepared

We recommend regularly checking the CIPP’s policy hub and other reliable sources for the latest information and guidance. Staying informed is key to ensuring smooth payroll operations and compliance with the law.

Our team is well-equipped to provide you with the necessary support and guidance to ensure your business remains compliant and efficient in its payroll management.

If you have any questions or need assistance with adjusting to these new payroll changes, please don’t hesitate to contact us.