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New guidance on holiday pay
The new legislation that has been introduced by the government from 1st January 2024 means several updates to the laws surrounding holiday pay. You can learn more about the changes themselves in our other recent guide ‘Changes to the law on holiday pay’. However, in this article we’ll be discussing in more detail what these changes mean for employers and what you can do to ensure your business adheres to the new laws.
Summary of the changes
Below is a brief description of some of the key changes being made by the government in the new holiday pay reforms.
- Implementing a method of calculating statutory holiday entitlement for part-year workers and workers with irregular hours.
- Outlining a clear definition of irregular hours workers and part-year workers in relation to the new holiday accrual method and rolled up holiday pay.
- Getting rid of the Working Time (Coronavirus) (Amendment) Regulations 2020, which affect the accrual of carryover leave from COVID-19.
- Introducing a way to work out the amount of leave an irregular hours or part year worker has accrued when they take maternity or family-related leave, or they are off sick.
- Maintain current rates of holiday pay, so 4 weeks is paid at a normal rate of pay for the worker and 1.6 weeks is paid at a basic rate, using 2 distinct pots of leave.
- Provide a definition of ‘normal remuneration’ in terms of the 4 weeks statutory annual leave.
- Offer rolled-up holiday pay as an option for calculating holiday pay for irregular hours workers and part year workers.
What do the changes mean for employers?
It’s important that employers familiarise with the changes and how it might impact their business and employees. Any employers who haven’t been paying their workers normal remuneration (including consistent overtime, commission, and bonuses) for the 4-week EU based holiday entitlement will need to adapt their approach now it is confirmed that the government is keeping the EU rules.
Additionally, employers should review their employment contracts and holiday policies to ensure it is in line with the changes. If you intend to differentiate between the 4-week holiday paid at the employees’ ‘normal’ rate and the 1.6 week of basic pay, that should also be made clear in the relevant employment documentation. It should be specified what order the annual leave should be taken and stated to employees that they risk losing their holiday entitlement at the end of the year if it’s not taken.
Employers of workers with irregular hours and part-year workers will likely need to amend their holiday policies and employment contracts to accommodate the new holiday accrual terms. Also, you will want to think about whether rolled up holiday pay is a suitable option for your business. Keep in mind that any changes to employment contracts will need the workers agreement first. If you have any questions or need support with updating your holiday policies or employment contracts, it’s best to seek specialist advice for employers from experienced lawyers like Employment Law Services (ELS) LTD.
How are the changes being received?
The new reforms on holiday pay have been mostly received positively by employers and employees. With some employers saying that they will bring about much needed clarity and fairness around holiday pay for part-year workers and workers with irregular hours, especially contractors and individuals who work through umbrella companies. It is hoped that the new changes will result in a more transparent system that is easier and more accessible for employers and employees and reduce the risk of holiday pay skimming by unprofessional and unlawful businesses.
Where can you get help with employment law?
If you need employment law help for employers, whether it’s in relation to the new updates to holiday pay or anything else in the vast topic of employment, our team can help. Our consultants have many years’ experience in the industry, developing the required knowledge and expertise to help employers adhere to the necessary regulations and implement beneficial processes that allow them to achieve the best outcomes. Book a free consultation online to get started or contact us if you have any questions.