Important changes to the holiday pay legislation coming up

Although the recent King's Speech had limited coverage of employment law (disappointing!), the rest of the week witnessed significant developments for employers and their advisors. Earlier this year, the government confirmed a review of certain aspects of retained EU law, specifically focusing on changes to the Working Time Regulations (WTR) and the calculation of holiday pay. These plans have now been reiterated, with additional details on addressing the calculation of holiday pay for part-year and irregular hours workers.

Draft legislation has been laid down and is expected to be effective from January 1, 2024. However, the provisions related to the accrual and payment of holiday for part-year and irregular workers will apply to leave years starting on or after April 1, 2024. Consequently, the impact may take time to materialise for some workers and employers.

Regarding WTR changes, the government, considering feedback from the consultation, has announced a law change for part-year and irregular hours workers. This change allows holiday accrual at the rate of 12.07% of normal pay, based on hours worked in the relevant pay period. The initially proposed 52-week reference period will not be adopted. Part-year and irregular hours workers will now have holiday entitlement under a new regulation 15B, with accrual at the 12.07% rate, calculated in hours rather than weeks.

The new provisions also introduce a legal right to rolled-up holiday pay, eliminating the need for employers to make separate payments. This change applies to part-year workers or those with irregular working hours. Definitions for irregular hours and part-year workers are provided in the new regulation 15F.

Furthermore, the government clarified that it will not consolidate the two types of leave entitlement under WTR but will maintain them separately. The legislation also confirms that holiday pay calculations should include payments linked to task performance, professional or personal status, and other regularly paid items.

Additional amendments to the WTR include the removal of the requirement for employers to keep records of daily working hours, as long as compliance can be demonstrated without such records. The right to carry over leave due to coronavirus effects will be removed, but workers can utilize such leave until March 31, 2024. The legislation also restates EU rights related to the carry-over of annual leave in various circumstances and defines normal pay under regulation 13.

If you have any questions or require support in navigating these changes, please feel free to reach out to Sarah Jo at [email protected].

Stay informed and proactive to ensure a seamless adaptation to the new holiday pay regulations.