Holiday pay changes: What employers need to know

Some of these provisions apply only to the original 20 days provided for full time employees back in 1998 (known as the “EU entitlement”) and others to the full 28 days provided for by an amendment to the Working Time Regulations in 2007 (known as the “UK additional entitlement”).

The new provisions are as follows:

• Workers can carry holiday entitlement over into the following holiday year if they were unable to take it due to a period of maternity leave or other family-friendly leave; this applies to the EU entitlement and the UK additional entitlement.
• Workers can carry holiday entitlement over into the following holiday year if they were unable to take it due to a period of long-term sick leave; this only applies to the EU entitlement and, in addition, must be taken within 18 months of the end of the holiday year from which it was carried over.
• Workers can carry holiday entitlement over into the following holiday year if their employer fails to:
  • recognise the worker’s entitlement to paid annual leave;
  • give the worker reasonable opportunities to take the leave; or
    
  • inform workers that they will lose any entitlement not taken by the end of the holiday year.

This only applies to the EU entitlement

• Holiday pay calculations must take into account all aspects of “normal remuneration” including:
  • bonus or commission payments which are intrinsically linked to the worker’s performance of tasks;
  • overtime pay which has been paid to the worker on a regular basis in the 52 weeks prior to the holiday period in question; and
  • additional payments for length of service, seniority or possession of a professional qualification.

These provisions have been enshrined in case law for some time but are now part of statute.

HRSolutions can amend your Leave policy to ensure that it is compliant with the new legislation, and can advise on individual cases.

In addition, a “new” method of calculating holiday entitlement for irregular hours and part-year workers will come into force for leave years commencing from 1 April 2024 onwards. This is effectively going back to the old 12.07% which used to be utilised in irregular hours contracts before it was found to be unlawful.

For both the EU entitlement and UK additional entitlement, holiday for irregular hours and part-year workers will be calculated in terms of hours and will be deemed to have accrued on the last day of each pay period. Employers can choose to pay at the time the holiday is taken at the rate of the average weekly pay over the previous 52 weeks (as is the current requirement) or to pay rolled up holiday pay at a rate of 12.07% of the hours worked in the pay period.

HRSolutions can assist you in identifying to which of your workers this will apply; in providing Contracts of Employment which include these provisions (or amending your existing Contracts); advising on the consultation necessary if you are looking to change you method of calculation for existing employees; and performing the holiday pay calculations for you.