The Verdict - December 2023

• Changes to annual leave and holiday pay rules
• New regulations bring changes to the Equality Act

Changes to annual leave and holiday pay rules

On 1 January 2024, important changes to holiday pay calculations, carried-over leave entitlements and record-keeping obligations take effect under the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023.

Annual holiday pay

Employees and workers are entitled to 5.6 weeks' annual holiday leave. This is split into separate allocations of 4 weeks and 1.6 weeks.

The regulations confirm that, when calculating holiday pay for the 4 week allocation, employers must include the following types of payments:

• Payments intrinsically linked to the performance of tasks a worker must carry out under the terms of their contract, e.g. commission.
• Payments that have been regularly paid to the worker in the last 52 weeks, e.g. overtime.
• Payments for professional or personal status relating to length of service, seniority or professional qualifications.

Holiday pay for the other 1.6 weeks' annual leave continues to be based on basic pay plus any guaranteed overtime.

Carrying over annual holiday leave

For leave years starting on or after 1 January 2024, workers (other than part-year or irregular hours workers) must be allowed to carry over their annual holiday leave as follows:

• Up to the full 5.6 weeks if they couldn't take it due to being on another type of statutory leave (e.g. maternity leave, shared parental leave or adoption leave). They must be allowed to take it in the following leave year.
• Up to 4 weeks if they couldn't take it because they were on sick leave. It must be used within 18 months of the end of the leave year in which it accrued.
• Up to 4 weeks (which must be used by the end of the following leave year) if their employer failed to do any of the following: Accept they have the right to take paid holiday, (e.g. because they were wrongly treated as self-employed). Give them a reasonable opportunity to take their leave or encourage them to take it. Tell them that if they don't take their leave by the end of the holiday year, they'll lose it.

If they remain entitled to any of the above carried-over leave when their employment ends, you must include payment for it in lieu of any untaken leave.

Note that the regulations also remove provisions that allowed longer carry-over if a worker was unable to take leave due to the pandemic. Any remaining carried-over leave must be taken by 31 March 2024.

Record keeping

A 2019 EU case held that working time records must be kept showing the number of hours a worker worked each day and each week.

UK businesses do not have to comply with this case and can continue to keep 'adequate records' of working time as stated in the Working Time Regulations (i.e. the maximum working week, working time of young workers, night work, health assessments and the transfer of night work to day work).

Other changes

The regulations will also bring changes to calculating annual holiday leave and pay for part-year and irregular hours workers and will, for smaller businesses, streamline the consultation requirements under the Transfer of Undertakings (Protection of Employment) Regulations 2006.

However, these changes only come into effect later in the 2024 – we'll keep you updated nearer the time.

New regulations bring changes to the Equality Act

Several anti-discrimination protections originally introduced by the European Court of Justice will become law in Great Britain on 1 January.

When the UK was in the EU

The UK had to incorporate several EU Directives into its laws regarding equal treatment and discrimination. The majority of these were included in the Equality Act 2010.

The highest EU court, the European Court of Justice (ECJ), also made many decisions interpreting the EU Directives. The UK courts had to apply these decisions when making judgments.

Since Brexit

After 31 December 2023, the UK Supreme Court and Court of Appeal no longer have to follow ECJ decisions when interpreting new cases about the Equality Act.

To ensure that the courts and tribunals continue to interpret the Equality Act in line with previous ECJ decisions, the Equality Act is being rewritten to include existing ECJ case law.

The Equality Act 2010 (Amendment) Regulations 2023 will therefore apply to England, Scotland and Wales from 1 January 2024, making the following changes:

Pregnancy, maternity and breastfeeding

• Any less favourable treatment at work on grounds of breastfeeding will now be direct sex discrimination.
• Women will now be protected from discrimination on grounds of pregnancy and maternity during and after the protected period (the duration of the pregnancy and any statutory maternity leave).
• Protection from unfavourable treatment in connection with pregnancy or childbirth will now extend to maternity as well.
• Previously, women were protected against pregnancy and maternity discrimination if they qualified for maternity leave under the Maternity and Parental Leave etc. Regulations 1999. Now this is extended to women who have equivalent rights under an employer's occupational scheme.

Indirect discrimination

Previously, a worker could claim indirect discrimination if their employer applied a provision, criterion or practice that caused them to suffer a disadvantage due to their protected characteristic.

Now, a worker without the protected characteristic can also claim indirect discrimination where they suffer the disadvantage alongside the worker with the protected characteristic.

For example: a policy requiring workers to work full-time, or return to the office full-time, may amount to indirect disability discrimination if it detrimentally affects a disabled worker. This could now be relied on by other non-disabled workers if, say, they care for disabled family members.

Definition of disability

Previously, someone was defined as disabled if they have a physical or mental impairment that has a substantial and long-term effect on their ability to carry out normal day-to-day activities.

The definition now clarifies the meaning of normal day-to-day activities as including the ability to participate fully and effectively in working life on an equal basis with other workers.

New direct discrimination recruitment claim

Direct discrimination may occur if a recruitment decision contains a discriminatory statement, even when there's not an active recruitment process underway and no identifiable victim.

Equal pay claims

Previously, a worker making an equal pay claim had to point to an actual comparator employed by the same employer or an associated employer.

Now, they can bring an equal pay claim using a comparator whose terms are set by the same collective agreement or by the same single body responsible for setting pay.

What this means for you

Though technically the law is changing, in reality most of these changes just preserve the current situation. However, the regulations should bring greater clarity for both employers and staff.

* This bulletin is for general purposes and guidance only and does not constitute legal or professional advice. Its contents should not be relied or acted upon without specific advice from a licensed legal practitioner.