Holiday Pay Update

The changes relating to the carryover of annual leave are now in force. These were largely a consolidation of existing EU case law and, as such, any impact will likely be very minimal.

However, the more notable changes are quickly approaching. The developments relating to holiday pay for irregular hours and part-year workers, namely the reintroduction of rolled up holiday pay and the change to the accrual of leave, will apply to leave years beginning on or after 1 April 2024 and the changes to the TUPE regulations will apply to a TUPE transfer which takes place on or after 1 July 2024.

In readiness for the changes on 1 April 2024, the Government has now published Guidance to assist employers (available here). The guidance adds some useful detail to our earlier update.

Notably the Guidance sets out definitions for an irregular hour’s worker and a part-year worker under the Regulations and provides examples for each. These definitions are important given that the changes to rolled up holiday pay and holiday accrual are only applicable to these groups. We expect that many employers may, however, be disappointed at how narrowly ‘part-year’ and ‘irregular’ worker are defined.

The Guidance sets out that “a worker is an irregular hours worker, in relation to a leave year, if the number of paid hours that they will work in each pay period during the term of their contract in that year is, under the terms of their contract, wholly or mostly variable”. This does not cover workers who have a (wholly or mainly) fixed number of hours under the contract but an irregular working pattern.  In practice, only those employees on genuine ‘zero hours’/’as and when’ contracts are likely to fall within the definition.

In addition, the Guidance establishes that “a worker is a part-year worker, in relation to a leave year, if, under the terms of their contract, they are required to work only part of that year and there are periods within that year (during the term of the contract) of at least a week which they are not required to work and for which they are not paid”. Interestingly, this means that workers who have weeks where they are not expected to work but continue to be paid on an annualised salary basis will not be classed as part-year workers.  In our experience, most teaching staff and other employees of educational establishments will fall within this category, meaning that, perhaps surprisingly, the new rules on part-year workers will not apply to them.

Overall, the narrow definitions, now confirmed by the Guidance, would seem to limit the effect of the new Regulations to a fairly narrow set of workers in very particular circumstances.

We would urge employers to look at the updated guidance and consider the upcoming changes prior to taking any steps to implement changes in their contractual or working practices.

If you require any advice or assistance with this, please get in touch.