The British government’s recent response to a consultation on streamlining holiday pay has cast a spotlight on crucial changes in the realm of irregular-hours workers. The proposed legislation outlines meticulous calculations for holiday pay, encompassing basic salaries alongside variables like commission and overtime
CREDIT: This is an edited version of an article that originally appeared on ICAEW
Published on 8th November 2023, the holiday pay plans emerged as part of the government’s response to the EU employment law consultation. The consultation primarily focused on refining record-keeping obligations, simplifying annual leave and holiday pay computations, and addressing consultation requirements under the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations 2006.
Key amendments
The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023, effective from 1st January 2024, usher in significant changes to the Working Time Regulations 1998 and the 2006 TUPE Regulations in Great Britain. For employers, accountants, and bookkeepers, the noteworthy amendments include:
Removal of the requirement to record daily working time.
Repeal of the Working Time (Coronavirus) (Amendment) Regulations 2020, with a deadline for using carried-over leave by 31st March 2024.
Legislative embrace of EU case law allowing workers to carry forward leave due to statutory entitlements or sickness, to be used within 18 months.
Navigating the changes: Expert perspectives
Ian Holloway, payroll and reward consultant, emphasises that these amendments are specific to Great Britain. For UK-wide employers adhering to Northern Irish regulations, the 2023 legislation remains irrelevant, creating a potential area of confusion.
The consultation, however, did not lead to the amalgamation of the three distinct leave blocks for full-time workers – a perpetual source of confusion. The blocks remain: four weeks at the ‘normal’ rate, 1.6 weeks at the ‘basic’ rate, and contractual leave as per the employment agreement.
Pay calculations and new carry-over rules
The regulations bring clarity to the definition of ‘normal’ pay for the four-week block, providing guidance in updated Department for Business and Trade documentation. However, discrepancies may arise between government-legislated items and employers’ interpretations.
Employers are advised by ICAEW to explicitly outline their definition of normal pay in policies, ensuring alignment with payroll software capabilities. Notably, two alterations apply to holiday leave years starting on or after 1st April 2024, giving employers time for adjustment.
Adjustments and clarifications
The 2023 Regulations introduce a definition for irregular hours and part-year workers, specifying leave accrual (12.07% of hours worked) and allowing optional rolled-up holiday pay. The rights of irregular hours workers to carry forward leave due to sickness or statutory leave are also outlined.
This reform is a response to the 2022 Supreme Court decision, overturning the 12.07% calculation method and emphasising length of service. The government aims to reinstate this method for irregular hours, simplifying payroll and reducing costs.
Commission and overtime, regularly paid in the last 52 weeks, are explicitly included in the updated pay legislation. While not a seismic shift, this clarification aligns with EU case law, acknowledging that normal pay extends beyond basic salaries.
Its vital to stay abreast of these changes as they necessitate adjustments in payroll processes and compliance procedures. As the legislation of holiday pay regulations continue to shift, adaptability and a keen understanding of the evolving employment landscape become essential to stay compliant.
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