New holiday pay rules are due to be enshrined in law. The government has introduced the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023. The Act has been introduced following the Supreme Court decision in Harpur Trust V Brazek. The bill clarifies holiday accrual and holiday pay calculations and other issues.
Employers and employees should take careful note of the changes.So what are the changes to take note of?
How to Calculate Holiday Accrual for Zero Hours Contract Workers
The new act significantly reduces the uncertainty placed on employers following the UK Supreme Court decision in Harpur Trust v Brazel. That UK Supreme Court ruling made it very difficult to manage holiday. In addition the ruling set no guidance as to how to calculate holiday accrual for those worker who worked irregular hours. The new legislation clarifies the holiday accrual rates for workers who work irregular hours. This would include those who work zero hour contracts for example. Under the new Act, workers who work irregular hours will accrue statutory minimum rates of holiday at the rate of 12.07% for each hour of work, worked.
How to Calculate Holiday Pay
Holiday pay should include payments including commission payments which are intrinsically linked to performance of tasks. Holiday pay should include elements of pay for professional or personal status relating to length of service, seniority or professional qualifications and other payments such as overtime, which have been regularly paid to a worker in the 52 weeks preceding the calculation date.
Additionally, rolled up holiday pay will be permitted to be paid to workers who work irregular hours. For other workers, leave must be taken and holiday pay paid at the time the leave is taken. The only exception is when the worker terminates employment, then holiday pay should be paid for any holiday accrued but not taken.
New Penalties for Employers
New regulations have been introduced to assist workers to assert rights to take holiday and receive holiday pay. Employers who frustrate workers from asserting such rights will face new penalties.
The new act confirms that where a worker is unable to take holiday due to statutory leave, the worker will be entitled to carry leave forward to the following year.
Where the worker is unable to take leave, the worker will be entitled to carry forward holiday to the following leave year. This may apply for example when a worker is absent due to sickness for example. However the leave must be taken within 18 months from the end of the leave year in which it accrued.
Is your organisation ready for these changes? Or are you considering even more radical changes to time off in your organisation? HR First provides a range or services to ensure you remain legally compliant and a motivating workplace for your employees.