UK Government publishes draft legislation on holiday entitlement and pay

Holiday entitlement and pay

The UK Government has published draft legislation to implement important changes to holiday entitlement and pay under the Working Time Regulations. The draft Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 follow the Government’s response to two consultations covering a raft of holiday pay issues generated by EU law and domestic case law. The majority of the changes came into force in January 2024. It is likely that they will impact most UK employers, especially those who make extensive use of workers with irregular hours and those in sectors that engage seasonal or part year workers.

Following consultation earlier this year, the UK Government has made two big decisions. The first is to allow the practice of rolling up holiday pay in certain cases. Essentially, this means allowing employers of atypical workers to pay those workers an additional sum in respect of holiday pay each month, regardless of whether any holiday is taken during that period. This will apply to workers with atypical hours, not for all workers. The Government will not proceed with plans to introduce a 52 week holiday entitlement reference period for workers with irregular hours.

The second big change is the decision not to merge the current two separate leave entitlements into a single pot of statutory annual leave entitlement. The Government will not pursue its plan for a single annual leave entitlement of 5.6 weeks with a single rate of pay and will continue to maintain the two distinct pots of annual leave and the two existing rates of holiday pay. By keeping two distinct pots of leave, the Government has not simplified the process. In practice, many employers have already been paying all 5.6 weeks annual leave at the higher ‘normal pay’ rate so the impact is likely to be minimal.

Employers with irregular or seasonal workers should carefully review the new rules to ensure compliance. Feel free to contact us if you need further clarification as to how the new legislation will impact holiday pay entitlements in your workplace.

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