The much awaited government consultation on annual leave pay and entitlement has been released today. The government intends to reverse some of the changes we have seen to holiday legislation over the past 20 years, find out the details below.
The main takeaways are:
- 12.07% calculation of entitlement is set to resurface but only for part-year and irregular workers
- There will be no 52 week entitlement reference period except for maternity and sickness for part-year and irregular workers
- Rolled-up holiday pay will be legal for part-year and irregular workers
- The distinction between EU & UK rates of holiday pay will be retained
- Covid-19 holiday regulations will be repealed
It is important to remember that this is not legislation at this point. The government are progressing a statutory instrument with a proposed implementation date of 1st January 2024.
Please see the table with more detail on the above points, below. The link to the full consultation response is here. If you would like consultancy advice in relation to holiday pay, please contact the team using the web form here. We also have several upcoming holiday pay webinars, please see details here.
| Consultation | Proposal | Next steps |
| Holiday Pay & Entitlement Reforms | ||
| Holiday entitlement | Introduce 52-week holiday entitlement reference period. | We are not taking this proposal forward. It is no longer needed as the government is introducing an accrual method for calculating holiday entitlement for irregular hours and part-year workers. This will be the method of calculation in their first year of employment and beyond. Entitlement will be calculated as 12.07% of hours worked in a pay period. Other workers will continue to accrue leave at 1/12th of their entitlement on the first day of each month during their first year of employment. |
| Holiday entitlement | How to treat weeks without work in a reference period. | This proposal is not relevant and is not being taken forward. It relates to the proposal for 52- week holiday entitlement reference period, which the government is not taking forward. |
| Holiday entitlement | Using a fixed or rolling reference period. | This proposal is not relevant and is not being taken forward. It relates to the proposal for 52- week holiday entitlement reference period, which the government is not taking forward. |
| Holiday entitlement | Calculating holiday entitlement using a reference period in the first year of employment. | We are not taking this proposal forward. Instead, the government is introducing an accrual method for calculating holiday entitlement for irregular hours workers and part-year workers. This will be the method of calculation in their first year of employment and beyond. Entitlement will be calculated as 12.07% of hours worked in a pay period. Other workers will continue to accrue leave at 1/12th of their entitlement on the first day of each month during their first year of employment. |
| Holiday entitlement | Calculating how much holiday is used by taking a particular day off. | This is not relevant and is not being taken forward. The government is introducing an accrual method for calculating holiday entitlement as 12.07% of hours worked in a pay period for irregular hour and part-year workers. |
| Holiday entitlement | Calculating holiday entitlement for agency workers. | The government is taking this forward with a slight amendment. It is introducing an accrual method for calculating holiday entitlement for irregular hours workers and part year workers to be used in the first year and beyond, including, where applicable, agency workers. However, holiday entitlement will be calculated at the end of each pay period rather than monthly (as the consultation suggested) to give flexibility to employers. |
| REUL | Single annual leave entitlement | The government has decided that it will maintain the two existing rates of holiday pay so that workers continue to receive 4 weeks at their normal rate of pay and 1.6 weeks at their basic rate of pay. The government will therefore not be creating a single annual leave entitlement at this time but will consider this as part of any future reforms we do in this area. |
| REUL | Repeal Covid-19 carry-over regulations | The right to carry over leave under regulation 13(10) and 13(11) will be removed, so that the position reverts to that which was in place immediately before the amendments. Any leave accrued before 1 January 2024 will however be able to be used up until 31 March 2024. |
| REUL | Introduce rolled-up holiday pay | The government will introduce RHP for irregular hours workers and part-year workers only. |
| REUL | Method for calculating Rolled-up holiday pay if you have two rates of holiday pay | The government will legislate to ensure that all employers that choose to use rolled-holiday pay calculate it based on a worker’s total earnings in a pay period. |
| REUL | Definition of Irregular Hour workers & Part- year workers | We will define in legislation what we mean by irregular hours workers and part-year workers. Stakeholders have requested that we are clearer on who this captures in relation to the effect of the Harpur v Brazel judgment. |
| REUL | Accruing annual leave when irregular hours workers and part-year workers go on maternity/family related leave or sick leave | The government will legislate to introduce a 52- week reference period which would allow employers to look back and work out an average of hours worked across that period. |
| Record Keeping | ||
| REUL | Removing the uncertainty for employers about their record-keeping obligations | The government intends to remove the uncertainty and the potential high cost of implementing a system of recording working hours and provide legal clarity on the record-keeping requirements in the Working Time Regulations. |
| TUPE | ||
| REUL | To change the consultation requirements in the TUPE regulations, to simplify the transfer process, while ensuring that workers’ rights continue to be protected. | The government will proceed with the planned reforms to the TUPE consultation requirements. These reforms will allow small businesses (with fewer than 50 employees) and businesses of any size undertaking a small transfer (of fewer than 10 employees) to consult directly with their employees if there are no existing worker representatives in place. |
