NEWS & INSIGHTS

Key Changes to the Law on Holiday Pay and Working Time Regulations for Part-Year and Irregular Workers Set to Come Into Force

JMW LLP

Written by JMW Solicitors LLP

 

Following two consultations which took place earlier this year into holiday entitlement and pay calculations, the Government has now published its long-awaited response and has laid out proposals for key changes to the law on both holiday pay and the Working Time Regulations which are set to come into force next year.

The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (“Regulations”) are anticipated to take effect from 1 January 2024, however, the changes in relation to the accrual and payment of holiday pay for part-year and irregular workers only relate to leave years which start on or after the 1 April 2024.

Following the ruling in the case of Harpur Trust v Brazel, the Government made the decision to launch consultations in January and March 2023 aimed at addressing disparities in holiday pay and entitlement for atypical workers arising from the judgment.

What changes will the Regulations make to existing legislation?

The main changes which the Regulations will bring into effect are as follows:

  • Holiday accrual for part year and irregular workers only will be calculated at 12.07% of the workers’ normal pay based on the number of hours worked in the relevant pay period. The 52-week reference period originally proposed within the consultation will not be implemented.
  • Regulations 13 and 13A of the Working Time Regulations will be removed for part-year and irregular workers and will instead be replaced by the new Regulation 15B under which annual leave will accrue at 12.07% (the provisions will still remain for those who do not fall into this category).
  • Annual leave for part-year and irregular workers will also be calculated in hours as opposed to weeks.
  • The practice of paying ‘rolled-up’ holiday pay will be permitted for part-year and irregular workers (currently deemed to be unlawful).
  • Employers will no longer be obligated to keep records of their workers’ working time, as long as they are able to demonstrate that they are compliant with the Working Time Regulations.
  • The two existing holiday entitlements (4 weeks and 1.6 weeks) will no longer be merged and will remain separate. A new provision will be inserted into the WTR by the Government to explain what additional elements should be taken into account in determining what a “week’s pay” when calculating holiday pay. Such elements are as follows:
    • payments, including commission payments, where those payments are intrinsically linked to the performance of tasks which a worker is contractually obliged to do.
    • payments for professional or personal status relating to length of service, seniority or professional qualifications.
    • other payments, such as overtime payments, which have regularly been paid to a workers in the previous 52 weeks.
  • The new legislation will also set out the following definitions of part-year and irregular workers:
    • Part-Year: “a worker is a part-year worker, in relation to a leave year, if, under the terms of their 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.”
    • Irregular: “a worker is an irregular hours worker, in relation to a leave year, if the number of paid hours that they will work in each pay period during the term of their contract in that year is, under the terms of their contract, wholly or mostly variable.”

The proposals made by the Government are likely to be a welcome change by those employers who engage part-year and irregular workers as this is likely to mitigate the administrative burden which flows from the calculation of holiday pay and leave entitlement. Following the Supreme Court decision in the Harpur Trust v Brazel case, the proposed changes will also address any imbalance in respect of leave entitlement for part-year and irregular workers and will therefore ensure proportionality.

 

This article is for general guidance only and should not be used for any other purpose. It does not constitute and should not be relied upon as legal advice.

 

If you would like to discuss this article or any recruitment issue in more detail, please contact Simon Bloch of JMW Solicitors LLP either by email at simon.bloch@jmw.co.uk or by telephone on 0161 838 2628.

About the author