The start of 2024 heralds transformative changes in annual leave legislation, reshaping how employees and employers approach time off. 🌅 As we delve into these amendments effective from 1st January 2024, Your HR Friend is here to guide you through the key updates and provide insights into what you, as an employee, can expect from your employer.
Understanding the Foundation: Holiday Pay and Entitlements 🏖️💷
The government has decided to preserve the existing "pots of leave," offering a statutory entitlement of 5.6 weeks' paid leave, blending 4 weeks at 'normal' rate of pay under EU law and an additional 1.6 weeks at 'basic' rate of pay under the Working Time Regulations 1998. Crucially, the regulations outline what constitutes "normal remuneration" during leave periods, encompassing various payments linked to task performance, professional status and other regular payments over the preceding 52 weeks.
All full-year workers, except those who are genuinely self-employed, are legally entitled to 5.6 weeks of paid statutory holiday entitlement per year. Four weeks of this entitlement must be paid at a worker’s ‘normal’ rate of pay (as specified by Regulation 13 of the Working Time Regulations). This could include regular payments, such as overtime, regular bonuses and commission. The remaining 1.6 weeks’ entitlement can be paid at ‘basic’ rate of pay, that is, the worker’s basic remuneration (as specified by Regulation 13A).
The regulations do not state which entitlement should be used first. Many employers choose not to distinguish between the 2 pots of leave, and to pay the entire 5.6 weeks at the ‘normal’ rate of pay. If an employer wishes to pay different holiday rates for different periods of leave, then they should consider explaining this clearly and consistently to the worker, for example in the worker’s contract or staff handbook.
Holiday pay is based on the legal principle that a worker should not suffer financially for taking holiday. The amount of pay that a worker receives for the holiday they take depends on the number of hours they work and how they are paid for those hours. Pay received by a worker while they are on holiday should reflect what they would have earned if they had been at work and working.
From 1 January 2024, the components which must be included when calculating ‘normal’ rate of pay are defined in regulations.
The following payments must be included in the 4 weeks of normal (regulation 13 leave) holiday pay:
- payments, including commission payments, intrinsically linked to the performance of tasks which a worker is contractually obliged to carry out
- payments relating to professional or personal status relating to length of service, seniority or professional qualifications
- other payments, such as overtime payments, which have been regularly paid to a worker in the 52 weeks preceding the calculation date.
Workers with regular hours and fixed pay must receive the same holiday pay as the pay they would receive if they were at work and working.
For leave years beginning on or after 1 April 2024, part-year and irregular hours workers are legally entitled up to a maximum amount of 5.6 weeks of paid statutory holiday entitlement per year, calculated according to actual hours worked using the 12.07% accrual method. If their employer chooses to use rolled-up holiday pay, then the entire amount of their leave for irregular hours and part-year workers will be paid at the ‘normal’ rate of pay.🚀🌟
Revolutionising Pay Structures: Rolled-Up Holiday Pay 🔄💷
An exciting change comes with the introduction of rolled-up holiday pay as an additional method for calculating holiday pay for irregular hour and part-year workers only, for leave years beginning on or after 1 April 2024. Employers can now simplify calculations by paying an additional 12.07% to workers at the same time as basic pay. The practice, previously deemed unlawful, is now permissible, providing a streamlined approach for employers.
Rolled-up holiday pay allows employers to include an additional amount with every payslip to cover a worker’s holiday pay, as opposed to paying holiday pay when a worker takes annual leave.
The calculation of holiday pay by employers is 12.07% of a worker’s total pay as 12.07% is the proportion of statutory annual leave in relation to the working weeks of each year.
Employers using rolled-up holiday pay should calculate it based on a worker’s total pay in a pay period. A pay period is the frequency at which workers get paid, that is weekly, fortnightly, monthly and the like.
If employers intend to start using rolled-up holiday pay, they should revise their workers’ contract in case this amounts to a variation of contract. Employers should tell their workers if they intend to start using rolled-up holiday pay and for this payment to be clearly marked as a separate item on each payslip. The holiday pay should be paid at the same time as the worker is paid for the work done in each pay period. Employers of agency workers must include this information in the agency worker’s Key Information Document.
The holiday pay should be paid at the same time as the worker is paid for the work done in each pay period. Rolled-up holiday pay is to be paid in addition to the worker’s normal salary.
Employers that do not want to use rolled-up holiday pay for irregular hour and part-year workers can continue to use the existing 52-week reference period to calculate holiday pay for irregular hour workers if they choose to do so.
If a worker who receives rolled-up holiday pay goes off sick or takes maternity / family-related leave during a pay period, their rolled-up holiday pay would be calculated according to average amount of the worker’s total earnings in each pay period during the 52-week relevant period.
Note: Employers are advised to itemise holiday pay separately on payslips. 📋💡 Employees, pay close attention to your payslips.
Carrying the Torch: Leave Carry-Over and Responsibility 🕰️🔥
The legislation sets clear principles on holiday carry-over, empowering workers to carry over the full 5.6 weeks of holiday into the next year for reasons such as maternity/ family-related statutory leave, as a result of misclassified employment status, where the employer has failed to give workers a reasonable opportunity to take holiday or to inform them that holiday not taken will be lost.
If a worker working regular hours and all year round is unable to take some or all of their statutory holiday entitlement as a result of being off sick, then the worker will be entitled to carry forward up to 20 days of their untaken leave into the following leave year, provided it is then taken by the end of the period of 18 months starting from the end of the leave year in which it was accrued. These 20 days should be paid at the ‘normal’ rate.
Crucially, if an employer is at fault, workers will be entitled to carry forward into the next year the leave that they should have been entitled to take if:
- the employer has refused to pay a worker their paid leave entitlement
- the employer has not given the worker a reasonable opportunity to take their leave and encouraged them to do so; or
- the employer failed to inform the worker that untaken leave will must be used before the end of the leave year to prevent it from being lost
Previously, workers could carry over untaken leave into the next 2 years if they could not take it because their work was affected by coronavirus.
From 1 January 2024, workers can no longer accrue COVID carryover leave. Workers will still be able to use the leave they accrued prior to 1 January 2024 before or on 31 March 2024.
Annual Leave Accrual for Irregular Hours and Part-Year Workers 🔄⏰
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.
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. This includes part-year workers who may have fixed hours, for example, teaching assistants who only work during term time, and who are paid only when working.
If the reference period method of accrual is used, the holiday pay irregular hour workers and part-year workers receive will be their average pay over the previous 52 weeks worked. This involves taking the last whole week in which they worked and earned pay, ending on a Saturday, as the most recent week. (If the worker is paid weekly on a day other than a Saturday, this would not apply).
The definition of a ‘week’ for the purpose of the holiday pay reference period
The relevant definitions within the Employment Rights Act 1996 are:
- a week starts on a Sunday and ends on a Saturday;
- the holiday pay reference period should start from the last complete working week that was worked ending on or before the first day of leave, starting on a Sunday and ending on a Saturday.
The reference period must include the last 52 weeks for which they actually earned, and so excludes any weeks where no work was performed as well as any time when the worker was on sick leave or maternity or family related leave.
This may mean that the actual reference period takes into account pay data from further back than 52 weeks from the date of their leave. However, it should go back no more than 104 weeks. If this gives fewer than 52 weeks to take into account, then the reference period is shortened to that lower number of weeks.
A paid week will include a week in which the worker was paid any amount for work undertaken during that week. Only if no pay at all is received in a week, should it be discounted as part of the 52-week reference period.
Record Keeping Harmony: What Employers Must Know 🎵📚
The government aims to clarify record-keeping requirements, stating that businesses do not need to keep daily working hour records if compliance can be demonstrated without them. 📈📝
Next Steps for Employees🌟🚀**
As an employee navigating this evolving landscape, what should be your next steps?
1. Stay Informed: Keep yourself informed about the new legislation and its implications. 🧠📰
2. Review Contracts and Policies: Review your employment contract and company policies to ensure alignment with the updated legislation. 🔍📑
3. Communicate: Open communication with your employer is crucial. Seek clarification on any uncertainties regarding the changes. 🗣️💬
4. Monitor Pay Statements: Keep an eye on your pay statements, especially holiday pay calculations and address discrepancies promptly. 💼💷
5. Utilise Leave Entitlements: Plan and take your annual leave, contributing to a healthy work-life balance. 🏝️🚀
6. Understand Carry-Over Rules: Familiarise yourself with rules regarding leave carry-over and your rights in different scenarios. 🔄🔍
7. Be Proactive During Audits: If your employer conducts workforce audits, actively provide necessary information to ensure accurate record-keeping. 📊📢
8. Seek HR / Employment Legal Advice: If challenges arise, seek professional employment advice to protect your rights. ⚖️🔍
Embracing Change Together! 🌈🤗
The landscape of annual leave is evolving and with Your HR Friend by your side, both employees can navigate this change successfully. Stay informed, communicate openly and embrace the positive transformations as we usher in a new era of annual leave in 2024. Together, we can build workplaces that value and support the well-being of every individual.
Ready to navigate the new annual leave landscape? Connect with Your HR Friend today for personalised guidance and support. 🌐🤝🌐🚀
🌟2024 Annual Leave Shake-Up! 🎉 Unveiling Key Changes as of Jan 1st 🗓️