“EU Employment Law”, Holiday Pay and Entitlement – Consultation Responses

“EU Employment Law”, Holiday Pay and Entitlement

On Wednesday 8 November 2023, the Department for Business and Trade published its responses to the two consultations – reforms to “retained EU employment law”; and the consultation on calculating holiday pay entitlement for irregular hours and part-year workers.

What was proposed in the consultations?

To address the EU employment law consultation, three areas which could benefit from reform were highlighted:

  • Requirements for record-keeping, in line with Working Time Regulations (‘WTR’)
  • Proposals to simplify annual leave and holiday pay calculations
  • Consider the requirements of Transfer of Undertaking (Protection of Employment), or ‘TUPE’, regulations

We notified our clients of the second consultation in our July 2023 forum. As a brief summary, following the Harpur-v-Brazel ruling, the issue was that part-year workers were potentially entitled to a larger annual paid holiday entitlement than part-time workers who worked the same number of hours across the year but worked fewer hours each week consistently across the year. The consultation proposed that only the most recent 52 weeks would be counted, including those weeks where the employee had not actually been working. This was a change from the previous instructions whereby a countback of up to 104 weeks was possible, ignoring weeks when the employee did not work. The intention of this change was that it would more closely align workers’ holiday entitlement with the actual time they spend working.

Responses to the consultations

Holiday Pay Entitlement

The Government will not proceed with the proposal as outlined in the holiday pay entitlements consultation regarding the 52-week holiday pay reference period. Instead, opting for a simplified approach, the Government have legislated the method to calculate entitlement will be 12.07% of hours worked in a pay period for irregular-hour workers and part-year workers in the first year of employment and beyond.

WTR

The Government confirmed it will go ahead with the proposed changes to the record-keeping requirements under the WTRs.  The Government will clarify that businesses do not have to keep a record of all daily working hours of all their workers but will still need to keep adequate, proportionate records in the contact of workplace patterns.

Holiday Pay

The existing rates of holiday pay, as outlined in Regulation 13 and Regulation 13A, will be maintained. Furthermore, there will not be a single annual leave entitlement created and workers will continue to receive:

  • 4 weeks at normal rate of pay
  • 6 weeks at basic rate of pay

TUPE

The Government will proceed with the planned reforms to the TUPE consultation requirements.  These reforms will allow small businesses (<50 employees) undertaking a transfer of any size, to consult their employees directly if there are no existing worker representatives in place.

Rolled-Up Holiday Pay

The Government proposed to introduce rolled-up holiday pay as an option for all workers. However, we now understand the proposal to introduce rolled-up holiday pay will relate to irregular-hours workers and part-year workers (including some agency workers) only.  The introduction of rolled-up holiday pay will enable workers to receive an enhancement to their pay in respect of holiday pay instead of being paid holiday pay when they actually take leave.

We would urge organisations to contact us if you recognise any potential pitfalls or concerns about the responses given by the Department for Business and Trade.

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Michael Risi

Written by Michael Risi

Michael started his career by joining HMRC in 2014. During his time there, he worked as an integral part of a Debt Recovery team, with particular focus on PAYE. He developed into a coaching and mentoring role, delivering training sessions to new and existing staff through a transitional period.

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