Be Aware – Changes to Holiday Entitlement Calculation and Pay

Dementia Care
December 14, 2023

The Government has been consulting on the calculation of holiday entitlement and pay for workers who have irregular hours of work and zero-hour workers. As a result of the consultations, the Government has produced some new regulations, namely the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (“the Regulations”) which are due to come into effect on the 01 January 2024.

This is a welcomed change, as last year the Supreme Court’s ruling in the case of Harpur Trust v Brazel [2022] UKSC cast some doubt on how holiday entitlement for part-year workers should be calculated and therefore, the Regulations aim to provide some much needed clarity on the position.

What is changing?

The Harpur Trust v Brazel [2022] UKSC case confirmed that workers who only worked part of the year (i.e. term time only employees) but were employed on a contract which lasts for the full year were still entitled to the full statutory minimum holiday entitlement of 5.6 weeks, despite not working the full year. This clearly left part-year workers in a more advantageous position to employees who worked on a part-time basis, but had regular hours throughout the year, as they only received a pro rata equivalent of the 5.6 weeks’ holiday entitlement.

The Government has now, however, produced the Regulations which confirm that for holiday years starting on or after the 01 April 2024, the correct method to calculate holiday entitlement for workers who only work part of the year or irregular hours (including zero-hour workers), is by calculating the actual hours of work undertaken by that individual in a pay period and multiplying it by 12.07%.

In addition to this, it will now be permitted to pay part-year workers or those with irregular hours, rolled up holiday pay. Previously, it was the position that paying rolled up holiday pay was not in line with the objective of the Working Time Directive, on the basis that it disincentivised individuals from taking time off to relax. But under the new reforms, employers will have the option to either choose to pay rolled up holiday pay for irregular hours or part-year workers, or allow those individuals to take their holidays.

If an employer does elect to pay rolled up holiday pay, then an employer would need to apply an uplift to that individual’s pay by 12.07% for the pay period to include an enhanced payment for any holidays accrued during that period.

Other changes confirmed in the Regulations relating to holidays include:

  • Workers will have the right to carry holiday from one leave year to the next if they have been prevented from taking leave due to family leave (i.e. maternity, paternity, adoption, parental and shared parental leave) or sick leave (this confirms the existing case law)
  • The law introduced during COVID-19 which permitted workers to carry over annual leave which they were unable to take during COVID-19 into the next leave years has been revoked and any accrued holiday carried over under those rules must be used by 31 March 2024, or it will be lost
  • The Regulations state that employers are not required to keep a record of daily working hours of all workers if they are able to demonstrate compliance without doing so

How does this affect you?

It is common for the care sector to employ individuals on irregular hour or zero-hour contracts. Therefore, this guidance from the Government does provide some clarity on the position and now employers within the health care sector can have confidence in understanding what holiday entitlement a zero-hours employee or worker is entitled to.

In addition, whilst it was previously a technical breach of the law to pay rolled up holiday pay, the law will now permit employers to pay rolled up holiday pay for irregular hours and zerohour workers, without being in breach of the law.

It should be noted, however, that unless an employer elects to pay rolled up holiday pay for those individuals working irregular hours or zero-hour workers (as set out above), the position on calculating holiday pay if an individual is permitted to take their holidays has not changed and holiday pay should be paid when the worker takes their holiday and should be calculated as an average of an individual’s normal pay (inclusive of any commission and overtime payments) over the preceding 52-week period immediately prior to the holiday.

It is also important to note that these changes do not affect individuals who work regular hours of work on full-time employment contracts.

Employers may now want to undertake a review of their contracts of employment and policies relating to holidays, to ensure they are up to date and in line with the new Regulations which are set to come into force on the 01 January 2024.

 

If you have any queries or are in need of specific advice in relation to holiday entitlement or pay or any Employment law query, please contact a member of the AfterAthena team (part of the Napthens Group) who are able to offer 30 minutes of free advice to QCS members.

AfterAthena
AfterAthena

Employment Law Specialists

Share: 

February 19, 2024
QCS 12 audit series: Understand why each audit is important and learn how to share your audit actions with the team – Resource 12: Health and Safety
Read more
February 5, 2024
QCS 12 audit series: Understand why each audit is important and learn how to share your audit actions with the team – Resource 11: Observation
Read more
January 22, 2024
QCS 12 audit series: Understand why each audit is important and learn how to share your audit actions with the team – Resource 10: Medication
Read more