The government’s response to the Harpur Trust v Brazel case has been to introduce a number of significant changes to the Working Time Regulations, which will come into force on 1st January 2024.
New rules for accrual
Holiday entitlement for irregular-hours and part-year workers will be calculated in hours, not weeks. It will accrue at the rate of 12.07% of the hours worked in a pay period. For workers who are on sick leave or statutory leave, holiday entitlement will be calculated by reference to a 52-week reference period.
An irregular-hours worker is someone whose paid contractual hours are wholly or mostly variable, such as a zero-hours worker. A part-year worker is someone whose paid contractual hours extend over only part of a year (ignoring sick leave and statutory leave).
Holiday accrual for other types of workers will not be affected.
Rolled-up holiday pay becomes lawful
It will become lawful (but not compulsory) for employers to pay irregular-hours or part-year workers holiday pay that is rolled-up with their normal pay, provided certain conditions are met:
- it applies to leave years starting on or after 1 April 2024;
- it must be paid at the rate of at least 12.07% of normal pay;
- it must be paid in the pay period when the holiday accrues; and
- it must be calculated by reference to total earnings during the pay period.
This legitimises the practice that is already widely used by employers when paying holiday pay for irregular workers, such as zero-hours workers.
Elements of holiday pay
For irregular and part-year workers, holiday pay must comprise:
- payments, including commission, that are intrinsically linked to the tasks the worker is obliged to carry out;
- payments for professional or personal status relating to length of service, seniority or professional qualifications; and
- other payments, such as overtime payments, regularly paid in the preceding 52 weeks.
These elements will cover the vast majority of payments made to such workers.
The reference to the preceding 52 weeks is to paid weeks only: employers should ignore unpaid weeks and weeks of sick leave or statutory leave but, after ignoring such weeks, need not go back further than 104 weeks in total.
So, for irregular and part-year workers, when it comes to calculating holiday pay, there will no longer be a distinction between the “basic” four weeks’ leave introduced by the WTR in 1998, and the “additional” 1.6 week’s leave added in 2007. However, for all other workers the distinction will remain relevant for the time being because this is the effect of previous ECJ case law and the government chose not to amend this in the new Regulations. However, from 1 January 2024, the UK courts will be less bound to follow previous ECJ cases and so the approach to this issue could change in future.
Carrying-over holiday
The Covid regulations that permitted carry-over during a two-year period will be repealed from 1 January 2024. However, the new regulations preserve the carry-over rights established by previous ECJ case law and will apply to all workers. Carry-over rights will apply where:
- a worker has been on statutory leave;
- a worker has been on sick leave;
- the employer failed to recognise a right to holiday or paid holiday;
- the employer has failed to give the worker a reasonable opportunity to take holiday or has failed to encourage them to do so; or
- where the employer fails to inform the worker that untaken holiday will be lost at the end of a leave year.
Records of daily working time
The requirement in the WTR to keep “adequate” records of daily working time for each worker will be relaxed. Instead, the employer may keep such records as it reasonably thinks fit, provided it can still demonstrate compliance with its obligations.
If you would like to discuss how these changes may impact your business, please get in touch.