The government has responded to the consultation on reforms to retained EU employment law and the consultation on calculating holiday entitlement for irregular hours and part-time (IH&PT) workers.
They will legislate to introduce reforms to annual leave and holiday pay calculations in the working time regulations.
In brief, the government propose to reform or introduce the following:
- Defining for holiday pay purposes those who work irregular hours and part-time (IH&PT)
- A new accrual method for IH&PT of 12.07% of holiday entitlement for each hour worked in a pay period but holiday pay based on total earnings in the relevant period
- A 52 week entitlement reference period for maternity and sickness for IH&PT cases
- Ability to operate Rolled-Up Holiday (RUH) IH&PT workers based on total earnings in the pay period
- Entitlement of 4 weeks under EU and 1.6 weeks under UK regulations are to be retained
- Covid-19 holiday regulations allowing carry forward are to be repealed with any outstanding to be used by 31st March 2024
When do these come into force? A draft statutory instrument indicates a proposal to implement at break kneck speed on 1st January 2024 to be effective for holiday years commencing on or after 1st April 2023. Until then, the current law remains the legal position of all being entitled to a statutory minimum of 5.6 paid weeks leave with at least 4 weeks being paid at the 52 paid week average (excluding zero pay weeks).
Employers now have a short period of review and where change is to be implemented, initiate changes.
The following adapted table from the government consultation response shows each of the original proposals by question and the next steps the government are proposing to take:-
| Consultation | Proposal | Next steps government response |
| 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. |
| Repeal of European Union Legislation (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 & Partyear 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 52week reference period which would allow employers to look back and work out an average of hours worked across that period. |
PAYadvice.UK 8/11/2023 updated 9/11/2023 to reflect impacts for holiday year commencing on or after 1st April 2023.
