Holiday Entitlement and Holiday Pay Changes in 2024
On 8th November 2023, the Government published the draft Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (“ER Regulations”). The ER Regulations contain important changes to how holiday pay is calculated and some changes to TUPE and the Working Time Regulations (“WTR”). The ER Regulations are intended to come into force on 1st January 2024.
These changes are due to apply to holiday years starting on or after 1 April 2024 and are summarised below:
• Employers will be able to calculate holiday entitlement for irregular hours and part-year workers using an accrual method based on 12.07% of hours worked in the pay period. This provides clarity and considerably reduces the administrative burden on employers that resulted from the UK Supreme Court decision in Harpur Trust v Brazel.
• Rolled-up holiday pay for irregular hours workers and part-year workers will be permitted, calculated on total earnings in the pay period.
• A reference period of 52 weeks will be permitted to calculate holiday entitlement for irregular hours and part-year workers who are on long-term sick leave or family leave.
• Legislation introduced during the COVID pandemic allowing the rollover of holidays for two holiday years in certain circumstances will be revoked.
• The current right for workers to carry over annual leave where they have been unable to take their leave due to sickness, being on maternity leave or family-related absence which has been established through case law has been enshrined in the new ER Regulations.
The current basic (4 weeks) and additional (1.6) annual leave entitlement will not be merged meaning that there will continue to be different methods of calculating pay for these two periods of leave. The basic 4 weeks continue to be paid at ‘normal’ pay and the additional 1.6 weeks will be paid at the basic rate of pay.
Helpfully there will be a statutory definition of what amounts to ‘normal pay’ for the calculation of the basic 4 weeks holiday pay. What must be included when calculating ‘normal’ pay for the purposes of holiday pay has until now been set out in case law. Under the ER Regulations ‘normal’ pay will be defined in the WRT to include:
• commission payments which are intrinsically linked to the performance of tasks,
• payments for personal or professional status relating to the length of service, seniority or qualification; and
• overtime payments that have regularly been paid to a worker in the 52 weeks preceding the calculation date.
Changes to TUPE and WTR
The WTR will be amended to clarify and simplify the record-keeping requirements. Employers will no longer be required to keep a record of each worker’s daily working hours, although adequate records still must be kept.
The TUPE Regulations will be amended to allow employers to consult directly with employees where there are no existing employee representatives in place and either
• the transfer relates to a small business (i.e., with fewer than 50 employees); or
• where fewer than 10 employees are transferring.
The ability to pay rolled up holiday pay will considerably simplify the holiday pay position for irregular hours or part year workers and will therefore be particularly welcomed by organisations that engage atypical workers.
If you have any questions or you would like support and further advice, please do not hesitate to contact the Employment Team below.