Is your holiday pay policy up to date?
Wednesday 29th November 2023
The Government announced its intention to make reforms to holiday pay in May 2023.
Following this, draft regulations have been published that will come into force 1 January 2024. Here’s all the changes you need to know…
Record keeping requirements
The new obligations require ‘adequate’ records to be kept by employers in order to show compliance with working time regulations (WTR) provisions such as maximum working week and working time for young workers. There is no requirement to keep daily records of working time, as had been suggested by previous European Court of Justice (ECJ) rulings.
Carry-over of holiday
Where a workers paid holiday rights have been denied due to the following reasons, they will be entitled to carry over untaken holiday forward to the next leave year in the following circumstances:
- They were mistakenly treated as self-employed,
- A lack of reasonable opportunity to take the leave,
- They were not told of a ‘use it lose it’ rule.
This can be extended if their rights continue to be denied.
This replicates what we have seen in EU case law. Employees on sick leave or other statutory leave, such as maternity, will be entitled to carry-over holiday on the condition it is taken within 18 months of the end of the leave year from which it originally derives.
Rolled up holiday pay
Irregular hours or part-year workers will be able to roll up holiday pay contingent on the holiday pay being within their hourly rate of pay at the rate of 12.07%. The amount must be separately listed on their payslips.
The regulations confirm that annual leave is separated into two pots:
- 4 weeks EU derived leave to be paid at ‘normal pay’ rate
- Additional 1.6 weeks domestic leave to be paid at basic salary rate
Normal pay will be defined to include commission, overtime, and other payments.
Employers are encouraged to keep up to date with changes in this area and to amend their employment contracts, payroll arrangements, and holiday policies in time for the regulations coming into force in January 2024.
For any advice or support with amending relevant policies and contracts ahead of the new regulations coming into force, please speak to a member of the Employment Team who will be happy to advise.