The government recently published draft legislation which includes changes to the way holiday pay can be calculated for “part-year” and “irregular hours” workers (for leave years commencing on or after 1 April 2024).

What are the current holiday pay rules for offshore workers whose pay varies?

As matters stand, for any workers with no normal working hours (such as ad hoc offshore workers), there is a requirement to base holiday pay on an administratively burdensome calculation. Generally speaking, this looks at average pay (including the likes of overtime and commission) over a 52-week reference period.

A similar 52-week averaging calculation is required for those with normal working hours whose pay varies with (i) the amount of work done or (ii) the time of work. Rotational workers who receive an offshore allowance apportionable to offshore weeks may fall within this latter category.

What are the changes for “part-year” and “irregular hours” workers?

When the new rules come into effect, where a worker falls within the definition of “part-year” or “irregular hours” worker, instead of the 52-week averaging calculation an employer will be able to opt to use a more straightforward calculation of simply adding an uplift of 12.07% to remuneration for work done in order to account for holiday pay.

This is known as “rolled-up holiday pay” and (although widely used given the administrative difficulties in the 52-week averaging calculation) is currently unlawful.

What will this mean for offshore workers?

Offshore workers who are engaged on an ad hoc basis may fall within the definition of “irregular hours” workers meaning that, under the new rules, rolled-up holiday pay can be applied to them. This is because a worker will be an “irregular hours” worker where the number of paid hours they work in each pay period is, under the terms of their contract, “wholly or mostly variable”.

However, what about those who have normal working hours on a regular offshore rotation?

It is unclear whether these workers will fall within the definition of “part-year” worker. If they do, the new rules on rolled-up holiday pay will apply to them when these come into effect.

Under the new rules a worker will be a part-year worker where “under the terms of their contract they are required to work only part of that year” and there are periods “of at least a week which they are not required to work and for which they are not paid”.

Whilst an offshore worker engaged on a permanent contract to work a regular rotation is employed all year round, arguably their field break weeks are weeks “they are not required to work and for which they are not paid” and mean that they are only required to work part of the year. Careful consideration would need to be given to the contract, in particular any terms indicating whether salary is payable in respect of offshore weeks only.

For advice on whether the new rules will likely apply to your workers and on what elements of their pay to include in the rolled-up holiday pay calculation, please do get in touch.

Related News, Insights & Events