Following changes to the Working Time Regulations (WTR) which came into effect on 1 January this year, the government has now issued guidance for employers on calculating holiday pay and entitlement provisions.
The changes, which the government argue will “simplify” the calculations in the WTR, include the following:
- defining irregular hours workers and part-year workers in relation to the introduction of the holiday entitlement accrual method and rolled-up holiday pay
- introducing a method to calculate statutory holiday entitlement for irregular hours and part-year workers (applicable only to leave years beginning on or after 1 April 2024)
- introducing a method to work out how much leave an irregular hour or part-year worker has accrued when they take maternity or family-related leave or are off sick (applicable only to leave years beginning on or after 1 April 2024)
- removing the Working Time (Coronavirus) (Amendment) Regulations 2020 which affect the accrual of COVID-19 carryover of leave.
- maintaining the current rates of holiday pay where four weeks is paid at the normal rate of pay and 1.6 weeks is paid at the basic rate of pay, whilst retaining the two distinct “pots” of leave
- defining what is considered “normal remuneration” in relation to the four weeks of statutory annual leave.
- introducing rolled-up holiday pay as an alternative method to calculate holiday pay for irregular hours workers and part-year workers (applicable only to leave years beginning on or after 1 April 2024).
From 1 January 2024, the following must be included in the four weeks of normal holiday pay:
- payments, including commission payments, intrinsically linked to the performance of tasks which a worker is contractually obliged to carry out.
- payments relating to professional or personal status relating to length of service, seniority or professional qualifications.
- other payments, such as overtime payments, which have been regularly paid to a worker in the 52 weeks preceding the calculation date.
These changes were introduced after the decision of the Supreme Court in Harpur Trust v Brazel (ELR 787) which held that when calculating the amount of paid holiday leave to which a “part-year” worker on a permanent contract was entitled, employers should not pro-rate it to the proportion of the year worked. The government has legislated that term-time-only workers cannot claim a greater holiday entitlement than part-time workers.
Rachel Ellis of Thompsons Solicitors commented: ““The Brazel decision was a significant step forward in clarifying the law in relation to term-time workers and benefitted many low-paid (often female) members of the workforce. It is disappointing, if not surprising, that the government has taken action to reverse that decision. However, the Regulations also significantly weaken the rights of those who work only part of the year or irregular hours. Again, this disproportionately affects those in lower-paid and insecure work. We will have to wait and see the impact of these changes in practice and hope they are reversed by a future Labour government.’
To read the guidance in full, click here.