Holiday Pay and Entitlement Consultation Responses

On Wednesday (8^th November 2023) The Department for Business and Trade published its responses to the two consultations from earlier this year. The consultations were on reforms to retained EU employment law, and the consultation launched in January 2023 regarding calculating annual leave entitlements for part-year and irregular-hour’s workers.

What was being reviewed?

The consultation set out to seek views on 3 areas of EU employment law which could benefit from reform:*

• Record keeping requirements under Working Time Regulations
• Simplifying annual leave and holiday pay calculations
• Consultation requirements under the Transfer of Undertaking (Protection of Employment) or ‘TUPE’ regulations

     *Wording from gov.uk website

The Department for Business and Trade also responded on the earlier consultation launched in January 2023 regard calculating annual leave entitlements for part-year and irregular hours workers.

The outcomes of the consultation reviews 

• No further action will be taken on proposals to introduce a 52-week holiday entitlement reference period for calculating holiday; rather entitlement will be calculated as 12.07% of hours worked in a pay period for irregular hours / part-year workers only.
• Defining ‘normal remuneration’ to include commission and other payments, such as regular overtime payments. This means ‘normal pay’ will account for tasks which the worker is obliged to carry out under the terms of their contract.
• Existing rates of holiday pay will be maintained (Regulation 13 and Regulation 13A) and there won’t be a single annual leave entitlement created. Workers will continue to receive:
  • 4 weeks at normal rate of pay
  • 1.6 weeks at basic rate of pay
• Rolled-up holiday pay will be allowed but for irregular hours and part-year workers only.

How will the changes be implemented?

The proposed changes are set to come into effect from January 2024. Further clarification will be provided once we receive further government guidance.

Both rolled-up and 52-week holiday calculations have been adopted by employers, however the holiday entitlement process appears to be returning to its prior 52-week holiday calculation and steering away from rolled-up holiday pay. Both these approaches we believe are still valid. More information on this will follow once we receive further guidance from HMRC.

If you would like to discuss the impacts of these responses further for your business, please contact our payroll experts using the form below.