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Advanced Notice of Holiday Pay Changes from April 2020

From 6th April 2020, the UK government will be changing the holiday pay reference period that applies for calculating an average week’s pay where a worker has variable remuneration. This can either be because there are normal working hours, but the remuneration varies due to:

  1. The amount of work completed.
  2. The time the work is completed
  3. The worker does not have normal working hours.

This will be happening as part of the measures proposed to improve transparency between employers and individuals in the labour market.

With workers that have been with their employer for at least 52 weeks, the reference period will be increased from 12 weeks to 52 weeks, whereas workers who have been with their employer for less than 52 weeks will have a reference period of the number of weeks for which they have been employed with their current employer.

What is the reason for the change?

These changes being implemented will allow for better reflection of the seasonal nature of much casual and zero hours work, as well as reducing the incentives for employers to either encourage workers to take annual leave before busy periods or to discourage workers from taking leave just after busy periods.

What do employers need to do to prepare for April 2020?

All employers should ensure that they keep records of employee pay for the 52 weeks prior to 6th April 2020 and to continue to do so thereafter.

The UK Government plan to produce new guidance steps for employers on how to calculate holiday pay, as well as increasing awareness of holiday pay entitlements to both employers and workers.

How will this affect Opera 3 payroll?

Luckily, Opera 3 already has numerous facilities to assist all employers with the calculation of average weekly pay for holiday pay entitlement based on the current 12-week pay reference period. These can continue to be used after the period increases to 52 weeks:

  1. Holiday Pay Average facility; e.g. with weekly paid employees, the user can specify in ‘Payroll Set Options’ the number of week’ pay to use in the average pay calculation.
  2. Employee History view; e.g. an employee’s history record, recording the total of profile payments for that pay period, which is recorded by the ‘Payroll Update’.
  3. Advanced Payments & Deductions List report; e.g. a report which can be produced of specific payments over whatever period range the user requires.

To ensure that the above facilities will cater for 52 weeks of pay history as necessary, Opera 3 users should ensure that you have the associated retention settings set accordingly in ‘Payroll Set Options’.

If you require more information about the upcoming changes, then please contact the Synergy Technology team on 0345 456 0050.