Important changes to holiday pay and holiday leave calculations (Working Time Regulations) from 1st January 2024 â in England, Wales and Scotland (not Northern Ireland).
Introduction:
The Employment Rights (Amendment, Revocation and Transitional Provisions) Regulations 2023 have been introduced (as a result of Brexit) to implement existing EU and UK case law, relating to the Working Time Regulations, into UK legislation, and provide some clarity. It is effective 1st January 2024 (but parts are not implemented until 1st April 2024).
The Government have produced guidance to explain the changes, which is available here.
However, this Guidance does not have statutory status, therefore if the guidance and regulations conflict, the regulations take precedence. It has been noted by several legal commentators that the guidance does not provide clarity in a number of areas, so it is likely that the UK Courts will have to provide further interpretation in time.
The changes in detail:
| Name | Date Effective | Changes |
|---|---|---|
1. Holiday Pay and Holiday Entitlement for Irregular Hours Workers and Part-Year Workers(applies to all employees and workers who are covered by WTR) | variable, see below. | |
| Irregular Hours Workers and Part-Year Workers have a new legal definition (following the Supreme Court decision in Harpur Trust v Brazel): | 1.1.24 | Irregular Hours Workers are now defined as: Someone whose number of paid hours they work in each pay period is wholly or mostly variable (under the terms of their contract). (A pay period is how frequently a worker gets paid e.g. monthly). The Government Guidance gives examples of: Kevin â a hospitality worker who works a different number of hours per week = â an Irregular Hours Worker, if his contract states that his hours will vary in each per period, e.g. a casual/zero hours contracts. Paul â who has a rotating fortnightly shift pattern and does not work overtime = â not an Irregular Hours Worker, if his contract states the hours are fixed each week. |
| 1.1.24 | Part-Year Workers are now defined as: Someone who is contracted to work only during certain periods of the year â where there are periods within the year (of at least one week) in which they are not required to work and are not paid. The Government Guidance gives examples of: Melanie â a seasonal farm worker who only works and gets paid in spring and summer = â a Part-Year Worker, if her contract says there are periods of time (that last for more than 1 week) when she does not work and does not get paid. Ian â who is paid an annualised salary over 12 months but has periods of time when he is not working but still receives pay = â not a Part-Year Worker. To be a part-year worker, you donât receive pay if you are not working. The guidance says part-year workers are those who have fixed hours (such as teaching assistants) who only work during term-time and who only get paid when they are working. Any periods of sick leave or âfamilyâ leave (maternity etc) are ignored when deciding if someone is a Part-Year worker. |
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| How to calculate their holiday pay (both types of workers) | For Holiday Leave years starting on or after 1st April 2024 | Holiday entitlement for Irregular Hours Workers and Part-Year Workers (after 1.4.24) should only be calculated as follows: ⢠At 12.07% of actual hours worked in the relevant pay period. ⢠Subject to maximum of 28 days holiday entitlement per annum. ⢠(12.07% is 5.6 weeks divided by 46.4 working weeks). ⢠If these staff have been on maternity/family leave (e.g. paternity, adoption, Shared Parental Leave) or sick leave, then their entitlement is calculated by averaging the hours worked each week, over a 52 week period before the leave started. Then multiply the average weekly hours x 12.07% to find the number of hours of annual leave that the worker accrues during the sick/maternity leave; and then multiply those hours by the number of weeks in the pay period in question. The Government guidance (above) has examples on how to calculate this leave. |
2. Holiday Pay calculations, when determining the amount of a weekâs holiday pay | From 1st January 2024 | The Statutory Holiday Leave entitlement of 5.6 weeks (28 days) â is divided into two âpotsâ of leave: ⢠4 weeks of ânormalâ holiday pay (based on the original EU Working Time Regulations rights). ⢠1.6 weeks of âbasicâ holiday pay (based on existing enhanced UK leave). âNormalâ and âBasicâ holiday types are now written into UK legislation, where previously they existed through EU and UK case law; But nothing else has changed. |
| Holiday pay must include: | From 1st January 2024 | The 4 weeks of ânormalâ holiday pay must include: ⢠Basic Salary and ⢠Any payments, including commission payments, which are intrinsically linked to the performance of tasks, which a worker is contractually obliged to carry out. And ⢠Any payments relating to professional or personal status relating to length of service, seniority or professional qualifications. And ⢠Other payments, such as overtime payments, which have been regularly paid to a worker in the 52 weeks preceeding the calculation date. The new law does not state what should happen about bonuses â however, a bonus that is regularly paid, or that is linked to performance of tasks (as above) should generally be included when calculating 'normal' holiday pay. The Government Guidance just says that a workerâs normal rate of pay for these purposes âcould include regular payments, such as overtime, regular bonuses and commissionâ â again, the Courts may need to determine this. The remaining 1.6 weeks holiday entitlement is then paid at the rate of the workers basic salary. |
| However, it is quite normal (and legitimate) for companies, for administrative ease, to calculate all holiday entitlement based on ânormalâ pay. Some Companies also offer additional paid leave (contractual holiday entitlement) and calculate all these weeks at the same rate. How a Company chooses to pay the 5.6 weeks leave (all at ânormalâ rate or a split of ânormalâ and âbasicâ) should be explained in the Contract or Handbook. The new law sheds no light on how you tell which type of annual leave entitlement has been taken first. The Supreme Court in Agnew 2023 decided itâs not practical to distinguish between them; and the legislation does not address this. |
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3. Carry over of holiday leave | From 1st January 2024 | COVID leave. The Covid 19 Regulations that permitted carry over of leave for a 2 year period have been repealed from 1.1.24 â and leave must be used up (or lost) by 31st March 2024. |
| From 1st January 2024 | All other leave. The carry-over of unused holiday leave, into the next year (as established by previous EU and UK case law) is now written into UK law. The new rules are: ⢠Unless there is something different written in the Contract or Handbook , workers can normally carry over a maximum of 8 days leave in to the next year, with the agreement of their Employer (this has not changed) ⢠If a worker (with regular hours or not) is unable to take all of their statutory holiday (28 days) entitlement due to maternity/family leave, they can carry forward up to 28 days of untaken leave into the following leave year; and will need to use up all this leave in the following leave year. ⢠If a worker (who works regular hours throughout the year) is unable to take all of their statutory holiday entitlement (28 days) due to sickness, they can carry forward up to 20 days into the following leave year. This leave must be taken by the end of the 18 months following the end of the leave year in which it was accrued, and it must be paid at the ânormalâ rate. ⢠A worker who is an Irregular Hours or Part-year worker (see 1. above) who is unable to take all their statutory holiday entitlement due to sickness, can carry over up to 28 days of leave, which must be taken by the end of an 18 month period (as above). ⢠A worker who has been prevented from taking paid holiday (because the Employer did not give them a reasonable opportunity to take the leave, or they were not encouraged to take the leave) can carry over 4 weeks of leave to the end of the first leave year in which the employer allows them to take the leave. ⢠A worker who has not been entitled to paid holiday as their Employer has wrongly classified them as self-employed, can carry over 4 weeks of leave to the end of the first leave year in which the employer allows them to take the leave. ⢠Where an Employer fails to inform a worker that any leave they have not taken by the end of the leave year cannot be carried forward and will be lost â the worker can carry over 4 weeks of leave to the end of the first leave year in which the employer allows them to take the leave. |
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4. Rolled Up Holiday Pay | For Holiday Leave years starting on or after 1st April 2024 | Rolled up holiday pay has been unlawful since 2006 (although many companies have continued to do this furtively! âŚâŚ) However, for holiday years starting on or after 1st April 2024, Rolled up holiday pay will be permitted for Irregular Hours workers and Part-Year Workers (see 1.) N.B. it is not mandatory, you can choose to give Rolled-up holiday pay or not (for those eligible workers). N.B. If your holiday year doesnât start until 1st January 2025, then this change will not happen until then. Rolled up holiday pay is where you pay an additional amount in each pay period instead of paying workers when they actually take holiday time off. Workers will still need to take their 5.6 weeks (pro rata) statutory holiday entitlement time off, but they wonât be paid when they take it. |
| Rolled up holiday pay must be calculated at 12.07% of the workers total earnings in each pay period, based on their ânormalâ rate of pay (see 2.) There will be a cap so no worker can accrue more than 28 days per annum. If a worker is on sick leave or family leave then you need to calculate their rolled-up holiday pay based on the workerâs total earnings in each pay period during the previous 52-week period (if 52 weeks is available). The Government guidance has examples on how to calculate this. |
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| If you choose to use this method, it must be clearly stated in the workerâs employment contract, and the ÂŁ amount of holiday entitlement must be clearly identifiable as holiday pay on their pay-slips. If you introduce rolled-up holiday pay for existing staff (who donât already have it) then you will need an to issue an amendment to contract to them. |
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| TV Clients: You cannot use Rolled-Up Holiday Pay for âregularâ hours workers, so you must continue to use your current method of calculating holiday pay (whether that is 12.07% or 10.77% - although you may want to have a consistent approach and use 12.07% for everyone, if you have staff who you will give Rolled-Up Holiday pay too). It is likely Rolled-Up Holiday pay will only apply to your daily crew hires and irregular/short-term casuals. |
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5. Working Time Regulations Record Keeping | From 1st January 2024 | Currently, Employers should keep accurate records of the time their workers work each day, following a 2019 European Court judgement; although not many small Employers have ever done this. The new legislation removes this requirement. From 1st January 2024 - Employers need to keep âadequate recordsâ in order to comply with the WTR Regulations, in relation to the maximum working week and for night work (which donât have to be separate records just for WTR, but may be existing records kept for other purposes, e.g. pay records). There is no explicit obligation for Employers to keep records of compliance with workers required daily or weekly rest periods or the weekly rest break. |
If you have any questions, then please let me know (and we’ll update this page if any further insights or news is available). You can see our main Guide to the Working Time Regulations here, which has been updated in line with these changes.
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