Government’s Response to Retained EU Law and Holiday Pay Consultation published

Background

• The Department for Business and Trade has published Government’s response to the consultation on reforms to retained EU employment law and calculating holiday pay for part-year and irregular hours workers. Read the full consultation here
• The original consultation covered areas which Government considered could benefit from reform and removal of unnecessary bureaucracy which included;
  • Record keeping under the Working Time Regulations (“WTR”) and
  • Simplifying annual leave and holiday pay calculations under the WTR
• This response also considers an earlier consultation in relation to a holiday pay consultation published after the Supreme Court’s judgement in the Harpur Trust v Brazel case

Government’s Response Summary

• The legislation - The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023  - can be found here. This takes effect from 1 January 2024 and changes will be effective for leave years starting on or after 1 April 2024
• Rolled up holiday pay is being introduced as an option for irregular hours workers and part year workers (which will include some agency workers). It is not being introduced for full time or full year workers
• ‘Irregular hours workers’ and ‘part-year workers’ has been defined at Regulation 15F, so employers have guidance as to who this captures
• Furthermore, for irregular hours and part year workers, Government will introduce an annual accrual method to calculate holiday entitlement at 12.07% of hours worked in a pay period (rather than monthly) (capped at 28 days) – see Regulation 15B(3)(b)
• The legislation confirms that the hourly rate of pay in respect of any period of annual leave that an individual is entitled to should be calculated by dividing a week’s pay by the average number of hours worked by the worker

• Regulation 16A(7) confirms that employers must itemise the holiday pay payment on a pay statement
• Government is not taking forward the proposal to create a single annual leave entitlement. Instead, Government is maintaining the two existing entitlements to annual leave so that workers continue to receive 4 weeks at their normal rate of pay (standard remuneration) and 1.6 weeks at their basic rate of pay (basic pay + shift pay (excluding commissions and bonuses)
• EU law will be re-stated to protect workers rights in relation to being able to carry over annual leave when a worker is unable to take their leave due to being on family related leave or sick

Aspire comment

• The reforms which are being taken forward simplify and address concerns regarding the calculation of holiday entitlement for all irregular hour’s workers, including part-year and agency workers
• The temporary labour sector can breathe a sigh of relief now that it is confirmed that the commonly used 12.07% annual leave entitlement calculation will be lawful.  Also, legalisation of the use of rolled up holiday pay seems a logical amendment as this is already custom and practice in the temporary labour industry.  However, payroll providers will need to be conscious of the differing calculations that will apply.
• As we reported in January (2023) this consultation process seems to have been an expensive way of “travelling round the block” to end up back where we started off
• The publication of this consultation outcome is poor timing for the GLAA, who have recently published guidance on how temporary labour supply chains should be calculating holiday pay (see our news here).  The consultation response will make their guidance obsolete once the legislative changes are enacted