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Holidays in 2024

Posted on Dec 11, 2023 in All posts

The government has announced its update to the laws governing holiday and holiday pay – including the return of rolled up holiday pay and incorporating key European cases on commission and carry over of holiday.   Draft regulations have been laid before Parliament and, subject to parliamentary approval, they will come into effect on 1 January 2024.

Where does the right to paid holiday come from and why does it matter?

For most employees (and the broader category of workers), their contract will include an entitlement to a set number of days holiday which is stated to either be inclusive or exclusive of bank holidays.   When it comes to taking that holiday, the source of the holiday is not particularly relevant, but when it comes to being paid for that holiday and/or carrying over to another year, the source of the holiday can make a big difference.

Typically, holiday entitlement will be a combination of:

  • 4 weeks’ leave derived from EU law paid at “normal pay” (EU holiday)
  • an extra 1.6 weeks’ leave from the Working Time Regulations 1998 which can be paid at basic pay (Working Time Regs holiday); and 
  • additional contractual holiday which can be paid at basic pay.

Employers can choose to enhance the additional Working Time Regs holiday and/or the contractual holiday to pay at “normal pay”, but they cannot choose to pay 4 weeks’ EU holiday at less than “normal pay”.       

A week’s pay v “Normal pay”

The draft regulations are intended to incorporate existing case law on “normal pay” so that for the purposes of the 4 weeks’ EU holiday, a week’s pay will include commission and regular overtime.   

For the additional 1.6 weeks’ Working Time Regs holiday, the standard definition of a week’s pay will continue to apply unless rolled-up holiday pay is being used and contractual holiday will continue to be governed by the terms of that contract. 

The return of rolled-up holiday pay 

For holiday years starting on or after 1 April 2024, the draft regulations set out a new system of holiday accrual for workers who work irregular hours and part-year workers.    This is designed to cover EU holiday and Working Time Regs holiday, but could also be applied to contractual holiday.   

Holiday will be calculated in hours rather than weeks and will accrue on the last day of each pay period (e.g. weekly, monthly) at the rate of 12.07% of the actual hours worked in that pay period.    If a worker is sick or on statutory leave (e.g. maternity leave) the average over a 52-week reference period will be used.

Holiday can then be paid either:

  • when holiday is taken (calculated using the previous 52 weeks’ pay to get an average hourly rate of pay over the last year); or.
  • by applying an uplift of 12.07% for work done in each pay period. 

 Carry-over

The draft regulations also incorporate existing case law on the right for workers to carry over holiday from one leave year to the next, where:

  • they are unable to take some or all of their leave as a result of taking a period of statutory leave (e.g. maternity leave) – applies to EU holiday and Working Time Regs holiday;
  • they are unable to take some or all of their leave as a result of taking a period of sick leave. The carried over leave must be taken within 18 months of the leave year to which it relates – applies to EU holiday only;
  • an employer fails to:
    • recognise a worker’s right to annual leave or paid annual leave;
    • give the worker a reasonable opportunity to take leave or encourage them to do so;
    • inform the worker that leave not taken by the end of the leave year will be lost.

In any of the “failure” cases, the right to take the carried-over leave will last until the end of the first full holiday year in which there is no such failure by the employer and will apply to EU holiday only.  

Where rolled up holiday pay is being used, the carry over rights apply to EU holiday and Working Time Regs holiday.   The right to carry over contractual holiday can continue to be determined by the rules set out in that contract.   

Do I need to change anything?

The first step will be to review what you have in place.  If you are already following the EU case law, then there should be little to change unless you want to introduce or re-introduce rolled up holiday pay, but there is the opportunity to ensure that your contracts and policies are up to date.