Rolled up Holiday Pay to be introduced for part-year and irregular-hour workers

In its response to the retained EU employment law consultation, the government announced it would introduce rolled-up holiday pay for all irregular-hours workers, including part-year and agency workers. 

Overview of the Retained EU Employment Law Consultation

The government launched a consultation on retained EU employment law on the 12^th of May 2023, and concluded on the 7^th of July 2023. The consultation sought views on three key areas of retained EU employment law which could benefit from reform:

• Simplifying annual leave and holiday pay calculations in the Working Time Regulations
• Record-keeping requirements under the Working Time Regulations
• Consultation requirements under the Transfer of Undertakings (Protection of Employment) regulations (TUPE)

You can read the full consultation on the government’s website.

Outcome of the Retained EU Employment Law Consultation

The government had initially proposed introducing rolled-up holiday pay to all workers but has decided to limit its introduction to part-year or irregular-hours workers as it would offer little benefit to employees with regular hours. Therefore, employers of atypical workers will be able to pay them an additional sum in respect of holiday pay each month, regardless of whether any holiday was taken during that period.

However, the government has announced that they will not go ahead with plans to introduce a 52-week holiday entitlement reference period for irregular hours workers. Instead, the government will legislate to introduce an accrual method to calculate entitlement at 12.07% of hours worked in a pay period for part-year workers and irregular-hours workers in the first year of employment and beyond.

Additionally, the two existing holiday pay rates will be maintained (Regulation 13 and Regulation 13A), and there won’t be a single annual leave entitlement created. This means workers will continue to receive four weeks at the standard rate of pay and 1.6 weeks at the basic pay rate.

Harpur v Brazel Judgement

Stakeholders have requested that a more precise definition be provided concerning irregular hours workers in relation to the effect of the Harpur v Brazel judgement. As a result, the government has announced that they will define what they mean by irregular hours workers and part-year workers in legislation.

How will rolled-up holiday pay be calculated if workers have two holiday pay rates?

The government will legislate to ensure that all employers using rolled-up holiday pay calculate it based on a worker’s total earnings in a pay period.

The Working Time (Coronavirus) (Amendment) Regulations 2020

The Working Time (Coronavirus) (Amendment) Regulations 2020 were introduced in March 2020 as an emergency temporary legislation to prevent workers from losing annual leave entitlement if they could not take it due to the effects of coronavirus. The amended regulations allowed workers to carry over four weeks of regulation leave into the following two years if it was not reasonably possible or practicable for the leave to be taken in the year to which it related.

As we recover from the pandemic, the government will remove these regulations as they are no longer required, and the legislation will revert to how it was before the amendments. From the 1^st of January 2024, workers can no longer accrue coronavirus carryover leave. If you still have leave to use, you can still use leave accrued before the 1^st of January 2024 on or before the 31^st of March 2024.

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