Holiday pay and entitlement reforms

Blog Annual Leave

Starting January 1, 2024, the Working Time Regulations as amended by The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 introduced changes that aim to make holiday pay and entitlements less complicated.

Following Brexit, any European laws hanging around in the UK had an expiration date of December 31, unless some new rules were set up to save them. That’s where The Employment Rights Regulations 2023 come in, applying all over the UK. Besides bringing back some EU laws, these regulations throw in several changes to the existing ones.

These reforms include changes that affect rates of holiday pay and annual leave. They also cover handling irregular hours and part-year workers, accrual of COVID-19 carryover of leave, and rolled-up holiday pay.

Holiday entitlement

The Regulations define what an irregular hours or part-year worker is and makes changes for how their holiday entitlement for holiday years beginning 1 April 2024 and onwards are accrued.

Employers will need to calculate holiday entitlement for such workers at 12.07% of the hours worked in any pay period. This does not apply to the calculations for regular hours workers.

Holiday pay

The Regulations specify that all full-year workers are legally entitled to 5.6 weeks of paid statutory holiday entitlement per year. These are split into two pots.

  • Four weeks – the original EU leave entitlement – must be paid at the employee’s ‘normal’ rate of pay and the regulations now specify that this includes overtime pay, commission and allowances.
  • The remaining 1.6 weeks – an addition made by the UK – only have to be paid at the employee’s ‘basic’ rate of pay.

The government has produced guidance containing examples and calculation methods based on the legal minimums set out in the Regulations.

Many workers will have contracts that entitle them to holiday that exceeds the statutory minimum. Or the changes may make the standard holiday clauses used in an employer’s employment contract no longer legal. Therefore, businesses are encouraged to first check individual employment contracts, and if necessary, seek advice.

If you want to speak to a member of the HR team about your employment contracts, get in touch.

Posted in Blog.