Important update on holiday pay calculations and other post-Brexit employment law changes

Yesterday, 8 November 2023, the Government published its response to the consultation on post-Brexit reforms to employment including the pressing issue of how holiday pay should be calculated for part-year and irregular hours workers, following the high profile Harpur Trust v Brazel case. 

While not the final word on such matters, employers are likely to welcome clarity on the government’s proposals on complex areas such as holiday pay and TUPE.

We’ll be providing further details during our 2024 Employment Law Update on 18 January.  To book a place, click here.

In the meantime the changes can be summarised as follows:

1.The Government will keep two separate pots of holiday.  Firstly, 4 weeks  ‘EU leave’ which will continue to be paid at the normal rate of pay.  Secondly, an additional 1.6 weeks’ leave which will be paid at the basic rate of pay.

The government will provide further legislation to detail what must be included within the normal remuneration for the purposes of holiday pay.  Interestingly, the response also states that the Government is considering fundamental reforms to the rate of holiday pay.

2. An accrual method of calculating annual leave entitlement from 1 January 2024 will apply meaning that employers can use        the 12.07% of hours worked formula for irregular hours workers, and part year workers in the first year of employment and            beyond.

3. It is expected that workers will maintain their EU level protection and  entitlements where holiday is carried over as a                  result of maternity leave, family related leave, or sick leave.

4. For irregular hours workers and part year workers, rolled up holiday pay will be introduced, to allow workers to receive an           additional amount or enhancement to their regular pay, rather than to be paid when they take annual leave.

5. Employers will no longer be required to keep a record of each worker’s daily working hours, as long as they can  demonstrate that they have adequate records (dependent on the individual workplace and working patterns).

6. With regards to TUPE, businesses with fewer than 50 employees or transfers involving fewer than 10 employees,        employers will be permitted to consult directly with employees where there are no existing employee representatives in place.

7. A backstop of 31 March 2024 has been provided for the carry over of leave under the Covid 19 provisions.

The full 49 page response can be found here.