The government has introduced forthcoming legislation to revamp holiday pay for part-time and irregular hours employees, effective from January 2024.
Alongside streamlining calculations, the Department for Business and Trade has sanctioned ‘rolled up’ holiday pay for part-time and irregular hours workers. This adjustment, arising from extensive consultations on EU employment law and holiday pay, aims to simplify entitlement calculations and ensure clarity for all irregular hours workers, encompassing part-year workers and agency staff.
But what implications will these changes have for employers and employees?
Holiday Pay for Irregular Hours and Part-Year Workers:
The proposed legislation unveils a fresh approach to holiday accrual for part-time and irregular hours employees. This move follows confusion stemming from the Harpur Trust v Brazel case in the Supreme Court last year, where part-year workers received more holiday entitlement than annualised part-time workers.
The new legislation, however, will compute holiday pay entitlement for these workers as 12.07% of the hours worked in a pay period, aiming to establish fairness and enhance transparency.
But why 12.07%?
Each person is granted the equivalent of 5.6 weeks of holiday annually, which includes bank holidays. The remaining weeks in a year sum up to 46.4 working weeks.
To calculate, divide the 46.4 working weeks by the 5.6 weeks, resulting in 0.1207 when multiplied by 100, representing 12.07%.
Holiday pay can then be simplified with this formula: Multiply the hours worked in the previous 52 weeks by 12.07% to determine the annual statutory entitlement in hours.
Rolled-Up Holiday Pay Will Be Permitted – But Selectively:
Rolled-up holiday pay involves employers supplementing workers’ normal hourly pay to cover their holiday pay entitlement. Previously deemed unlawful due to concerns of discouraging leave, it will now be permitted but restricted to part-time workers, irregular hours workers, and some agency employees. This makes the calculation much simpler.
Despite reservations voiced during the government’s consultation, acknowledging the mixed response, the legislation clarifies that full-time staff won’t be eligible for rolled-over pay. Yet, it emphasises the evident advantages for part-time and irregular hours workers while addressing concerns about disincentivising leave.
TUPE:
The reforms extend to changes in Transfer of Undertakings Protection of Employment (TUPE) rights, facilitating direct consultation by small businesses with new employees in the absence of worker representatives. Employers with existing employee representatives, including trade unions, will be mandated to consult them.
The reforms have garnered considerable support with many people expressing enthusiasm, emphasising the clarity and fairness these changes bring, especially for contractors and workers with non-standard working patterns. Rolled-up holiday pay is essential for safeguarding workers with irregular hours such as agency and umbrella workers, highlighting its role in ensuring fair treatment regarding accrued holiday pay due to employment nuances.
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