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Countdown to 2024: Preparing for Major Holiday Pay Changes

You may have heard that a few things are changing concerning holidays...

No this is nothing to do with cheap deals coming up just after Christmas - book now – pay later, free child places etc etc.

No, this concerns several quite major changes that employers must be aware of
 and what you should be doing in preparation.

Well, don't worry, Crown are here to help to summarise with key information and tips, and point you in the right direction.

The 2024 holiday pay changes are a set of new regulations which came into force on January 1st 2024 and make a number of changes to how holiday pay is calculated and administered for workers in the UK.  Their impact will be mainly felt by people who do not work full-time throughout the year, such as shift-workers, term-only employees, and those on zero-hours contracts.

These new rules could affect an estimated five million employees

Some of these changes are based on existing case law, while others are new provisions the Government state that they “… are reforming this legislation to make overtime, holiday pay and entitlement legislation less complex and easier for employers to follow.”, while critics state that they are simply cutting holiday allocations and pay for irregular and part-time workers, giving a saving to employers, or a cost to staff, of around £248m a year.

Whatever your viewpoint, it is one of the most significant divergences of employment rights since the UK left the EU working time directive.

Why are these changes happening?

They are happening because the current law on holiday pay has had several court cases challenging the way holiday pay should be calculated and paid. For example, the Harpur Trust v Brazel judgement. Lesley Brazel is a music teacher on a zero-hours contract who argued that she should get the same amount of holiday pay as her colleagues on full-time contracts.

The main changes to be introduced are:

  • Rolled-up holiday pay will be allowed in certain circumstances: This means that workers who have irregular hours or part-year contracts will be able to receive an additional amount or enhancement to their normal pay and then not receive any pay when taking holiday. This will only be an option for employers, not an obligation, and they will need to follow certain rules and conditions to use this method.
  • A clearer definition of "normal remuneration" for the purposes of calculating holiday pay for Working Time Directive holiday entitlement: This means that holiday pay for the first four weeks of statutory holiday entitlement will have to include payments that are intrinsically linked to the performance of tasks, payments for professional or personal status or qualifications, and payments that have been regularly paid in the 52 weeks preceding the calculation, such as overtime. This brings together the existing case law on what should be included in holiday pay and provides more guidance for employers.
  • Workers who have irregular hours or part-year contracts will accrue an annual leave entitlement of 12.07% of hours worked in each pay period in the first year of employment and beyond. This will reinstate the old guidance that was in place before the Harpur Trust case.
  • EU case law permitting carry-over of annual leave where the worker has been on maternity/family-related leave or sick leave will be restated in UK law: This means that workers who have been unable to take their holiday because of absence due to maternity/family-related leave or sick leave will be able to carry over their unused holiday to the next leave year. They will have to use their carried over holiday within 18 months of the end of the leave year to which it relates, otherwise they will lose it. Workers will no longer be able to carry over leave because of coronavirus, so any untaken leave relating to this should be taken before March 31st 2024.
  • Express carry-forward provisions will be introduced to cover situations where an employer fails to give a worker a reasonable opportunity to take holiday in a leave year: This means that workers who have not been able to take their holiday because of their employer's fault will be able to carry over their unused holiday to the next leave year. There will be no limit on the amount of holiday that can be carried over in this situation.

So, should I be worried? I haven’t planned for this yet!

worriedThe draft regulations state a start date of 1 January 2024; however, the holiday pay specific regulations will only apply to leave years beginning after 1 April 2024. Of course, in the current state of British politics anything could happen before then and all of this could be subject to change.

If nothing else, you should most certainly be considering the following:

  • First of all, assess the make-up of your workforce, taking into account the definitions of irregular hours worker and part-year worker, to see if there will be any impact.
  • What are your current arrangements regarding holiday entitlement and holiday pay applying to each category of worker. Are they compliant with the new rules?
  • Do you wish to make change current arrangements, by using rolled up holiday pay where permissible or providing a more generous contractual entitlement, for example?
  • If you use different rates of pay for different types of holiday, or, where permissible, you are using rolled up holiday pay, check that you have a system or methodology to ensure compliance and that adequate records are maintained. Of course, a good workforce management system, such as that provided by Crown WFM would help here.
  • Ensure that workers are reminded by systems, reports, or line managers, to take their holiday entitlement and given a reasonable opportunity to do so, or inform them that any leave not taken by the end of the leave year, which cannot be carried forward, will be lost. Again, this could be highlighted automatically by a good workforce management system (see provider mentioned in above paragraph! 😊)

More information and guidance on the new regulations from the following sources:
The Draft Employment Rights Regulations 2023  (Amendment, Revocation and Transitional Provision)
ACAS  Contracts and Holiday Pay Calculations

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