The draft Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (found here) (“the Legislation”) were announced on 8 November 2023 and are due to come into force on 1 January 2024.
The key changes in relation to holiday pay which employers should be aware of are: –
1. Atypical/irregular workers
An atypical worker are workers whose hours of work are wholly or mostly variable (such as casual workers) and also workers who contractually have periods of at least one week per year where they do not work and not paid (such as seasonal workers).
A new method of holiday pay will be introduced for these workers following the confusion of the Harpur Trust v Brazel decision of 2023. This decision had the effect of part year workers having a higher holiday entitlement than part time workers who worked the same number of hours on an annual basis. The new legislation effectively reverses the decision in Harpur Trust and employers will now be permitted (for atypical workers only) to calculate holiday as 12.07% of the hours worked in a pay period.
2. Rolled up holiday pay
This is the most significant change as employers will once again be allowed to pay holiday on a ‘rolled up’ basis which had previously been unlawful. This will only apply to atypical workers and will enable employers to pay a holiday enhancement to workers calculated based upon the worker’s total earnings in the relevant pay period instead of those workers taking paid annual leave. This will only apply to leave years which start from 1 April 2024. This method has some further requirements so employers should take advice before implementing this option.
3. Record Keeping
The new Legislation clarifies that employers no longer need to keep detailed daily records of working time. Employers will need to keep adequate records, but the method and manner is pretty much left to the individual employer providing they can demonstrate compliance in some way.
4. Carry-over of annual leave
Carry-over of annual leave has also been codified and all workers will have the right to carry over holiday from one leave year to the next if any of the following apply: –
A. The full 5.6-week reg.13 and reg.13A Working Time Regulation Act 1998 (“WTR”) holiday can be carried over into the following year where it cannot be taken due to maternity or shared parental leave.
B. The 4-week reg 13 WTR annual leave where it cannot be taken due to sickness (limited to 18 months) can be carried over.
C. The 4-week reg 13 WTR annual leave where the employer has failed to recognise the workers right to take paid annual leave, failed to give the worker a reasonable opportunity to take the annual leave (or failed to encourage them to use it) or failed to inform the worker that they will lose the annual leave if it is not used by the end of the relevant leave year.
During the Covid pandemic legislation was introduced to enable workers to carry over holiday for two years in certain circumstances. This will be revoked, and all carry-over accrued in this situation needs to be used by 31 March 2024 or will be lost.
6. Normal Pay
Normal pay (for the 4-week regulation 13 WTR leave) has been confirmed and will include: –
A. payments which are linked to the performance of contractual tasks (such as commission)
B. payments related to the professional/personal status relating to length of service, seniority or professional qualifications.
C. regular payments preceding the previous 52 weeks (such as overtime)
These changes are most likely to have the greatest impact on employers who use atypical/irregular workers. In theory, this should simplify the calculations for them. However, the legislation has not clarified all holiday pay issues which are still open to litigation such as whether bonuses need to be included in ‘normal pay’ holiday calculations.
If you are an employer and require advice on holiday pay and entitlement for your workers and employees, or you need assistance in updating your holiday policies or employment contracts, please contact us on 01483 303 636 or via our contact us page to see how we can help your business.
This article is intended as a general resource at the time of publication and no reliance should be placed on it.