The Retained EU Law (Revocation and Reform) Act 2023 (REUL) received Royal Assent on 29^th June 2023, and brought with it significant changes to employment law. From 1 January 2024 the higher UK courts will no longer be bound by EU case law. Some important rights relating to holidays stemming from this case law, are to be preserved by inserting them into the Working Time Regulations (WTR). Some of these changes will be introduced from 1^st January 2024, and others from 1^st April 2024.

The areas affected are:

1. Irregular hours workers and part-year workers.
2. Accrual of COVID-19 carryover of leave.
3. Rates of holiday pay and annual leave.
4. Rolled-up holiday pay.

Changes from 1st January 2024

To provide clarity for employers, definitions for two key terms have been added to the Working Time Regulations 1998 (WTR).

• Irregular “the number of paid hours they [the worker] will work in each pay period during the term of their contract is, under the terms of the contract, is wholly or mostly variable.”

If the worker has more than one contract with the same employer, whether their hours are wholly or mostly variable will be looked at in the round.”

• Part-year “Under the terms of their [the worker] contract, they are required to work only part of that year and there are periods within that year (during the term of the contract) of at least a week which they are not required to work and for which they are not paid.”

Calculating holiday entitlement for part-year and irregular-hours workers

The government has decided to legislate to seek to simply this position. Under the regulations, part-year and irregular hours workers will, for holiday years beginning on or after 1 April 2024, accrue holiday at 12.07% of the number of hours they have worked in each pay period.

Rates of Holiday Pay

Currently, holiday pay and entitlement is made up of 5.6.weeks (4 weeks under EU law) and 1.6 weeks (which was added by the UK Government). The four weeks EU holiday entitlement is paid at the “normal” pay rate (including elements such as commission and overtime), and the remaining 1.6 weeks at the “basic” pay rate. This difference has caused much confusion for employers over time.

Normal pay calculation will be as follows.

• Payments, including commission payments, are intrinsically linked to the performance of tasks that a worker is contractually obliged to carry out.
• Payments for professional or personal status relating to the length of service, seniority or professional qualifications.
• Payments, such as overtime payments, which have been regularly paid to a worker in the 52 weeks preceding the calculation.

Employers will therefore need to apply this to holiday pay for employees whose pay includes these payments.

Carry-forward of Holiday

COVID emergency rules introduced the right to carry over four weeks of leave into the next two leave years where it was not reasonably practicable for a worker to take that leave because of Covid, has been added into the WTR.  This right will be repealed, and from 1 January 2024 workers will no longer accrue covid carryover leave. For those that still have this carried over leave outstanding, they must use it on or before 31st March 2024.

The regulations make it clear that workers can carry forward holiday into the following holiday year where they are unable to take that holiday in the following circumstances:

• Statutory leave (including maternity, paternity, adoption leave etc)
• Sick leave – that holiday may be carried forward for 18 months
• Their employer has failed to recognise their right to annual holiday or payment for that holiday
• Their employer has failed to give them a reasonable opportunity to take that holiday or encourage them to do so
• Their employer has failed to inform them that any holiday not taken at the end of the holiday year, which cannot be carried forward, will be lost.

Rolled-up Holiday Pay

The regulations give the right for employers to legally use rolled up holiday pay for irregular hour workers and part year workers, thus overruling the ECJ case that held that rolled up holiday pay was unlawful. Holiday pay for such workers may be paid by way of a 12.07% uplift to the worker’s remuneration for the work done. The regulations specify that any itemised pay statement provided by the employer must indicate the amount of holiday pay that has been paid in respect of the relevant period.

The full guidance from the Government can be found on the link below.

https://www.gov.uk/government/publications/simplifying-holiday-entitlement-and-holiday-pay-calculations/holiday-pay-and-entitlement-reforms-from-1-january-2024