Understanding the changes to UK holiday laws

Employment consultant Nick Babington explains how the updates will affect your business

The Harpur Trust v Brazel case has impacted UK holiday entitlement laws, leading to pertinent changes in how holiday pay is calculated for certain categories of employees, and prompting a re-evaluation of holiday entitlement regulations, particularly concerning the treatment of part-time and irregular workers.

UK holiday entitlement laws have undergone revisions to ensure fair and equitable treatment of employees in calculating their holiday entitlement and pay. These changes are expected to come into place from January 1, 2024.

IRREGULAR HOURS/PART-YEAR WORKERS

An irregular hours worker is classed as a worker whose number of paid hours worked in each pay period is wholly or mostly variable. A part-time worker is a worker who is required to work only part of a year, and there are periods within that year of at least a week in which they are not required to work and for which they are not paid.

ROLLED-UP HOLIDAY PAY REINSTATED

One significant change is the reinstatement of rolled-up holiday pay (RUHP), allowing employers to include a sum representing a worker’s entitlement to annual leave in their regular pay.

This is only applicable for irregular hours/part-year workers. Employers must ensure that the holiday pay is transparently delineated within the overall pay structure and communicated to employees. RUHP is most common in sectors such as hospitality, seasonal work and social care. Employers must ensure that they do not use RUHP to disincentivise staff from taking their entitled leave, the change is strictly to alleviate the administrative burden on employers.

CHANGES TO TUPE

Under the revised regulations, small businesses with fewer than 50 employees will have the opportunity to consult directly with employees during a transfer under Transfer of Undertakings Protection of Employment rights (TUPE). This will also apply to businesses of any size doing a transfer of fewer than 10. Employers of businesses will no longer need to elect a worker representative during consultation. This change aims to facilitate smoother transitions during business transfers, enhancing communication and transparency between employers and employees in the context of TUPE processes.

CALCULATION METHOD FOR IRREGULAR WORKERS

For irregular workers, the calculation of holiday entitlement will now be based on an accrual method of 12.07% of the hours worked in the pay period. This change is proposed to take effect from 1st April 2024. It seeks to provide more equitable holiday entitlement for workers with varying work schedules, ensuring they receive their fair share of annual leave based on their working hours. This will prevent employers being forced to pay out for five to six weeks of holiday for employees who may only work minimal hours each year.

CARRY OVER OF HOLIDAY AFTER SICKNESS OR MATERNITY LEAVE

Employees will have the right to carry over untaken holiday entitlement after sickness or maternity leave.

This change aims to protect the rights of employees who may have been unable to take their holidays due to health-related reasons, ensuring that they do not lose out on their annual leave entitlement. The accrued leave must be taken within 18 months of the end of the holiday year in which the entitlement originally arose. This will limit the ability of employees on long-term sick leave for many years to accrue a huge entitlement requiring payment on termination of employment.

COVID-19-RELATED HOLIDAY PROVISIONS

Effective from January 1, 2024, new Covid-19-related holiday provisions will come into place. This includes amendments to ‘Covid-19 carry-over leave,’. Employers should note that any ‘ carry over leave’ must be taken by March 31, 2024, and appropriate records must be maintained to track and facilitate this provision.

RECORD-KEEPING

There has been a change in record-keeping requirements, with a focus on simplification. Previous legislation required employers to record the daily working hours of each employee. Employers will now only need to maintain ‘adequate’ records of weekly working time, streamlining the administrative burden associated with holiday entitlement tracking. Employers must ensure accurate and comprehensive record-keeping in compliance with the revised regulations.

By understanding and integrating these updates into their policies and practices, employers can foster a positive work environment while meeting their legal obligations toward holiday entitlement.

NICK BABINGTON

Nick Babington has been an executive board member for several group businesses for 16 years. Currently with Croner Group Ltd, he delivers client-based solutions to businesses of all sizes and advises on employment law, health and safety legislation, mental health, and good commercial practice. His main objective is to demonstrate the necessity of keeping your business up to date with the constant changes in employment law and business safety, whilst unravelling the potential pitfalls that can catch out all employers, however well-meaning their intentions.