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Employment Law Changes (2023)

We recently let you know about proposed changes to employment law, and we now have more information on the proposals regarding holiday and holiday pay as the government has commenced their promised consultation.

To help you understand their proposal, we have created five bite-size pointers, you and your business may find helpful when managing future changes.

1. Single-entitlement
2. Carry-over rules
3. Removal of ‘covid specific carry-over regulations’
4. Holiday pay rate
5. Rolled-up holiday

1. Single Entitlement

The government is proposing to merge the current two separate annual leave entitlements into ‘one pot of statutory annual leave’, while maintaining the same amount of statutory leave entitlement overall.

It’s intended that the single entitlement will be governed by one set of rules, in particular for holiday pay, and hopefully make things simpler for some businesses.

2. Carry-over rules

Holiday carry-over rules are to stay the same, apart from ‘Covid specific carry-over regulations’.

Businesses that wish to do so will still be able to permit employees to carry over up to 1.6 weeks of their statutory minimum holiday entitlement into the next holiday year, for example by allowing this in their contracts of employment.

In some special circumstances such as maternity leave or long-term sickness absence employees will remain entitled to carry-over holiday where they have been unable to take it.

3. Removal of ‘covid specific carry-over regulations’

The Working Time (Coronavirus) (Amendment) Regulations 2020 were introduced in March 2020 as emergency temporary legislation.

Their purpose was to prevent workers from losing holiday entitlement if they were unable to take it during a holiday year due to the effects of the pandemic.

As times have changed the government feels these regulations are no longer needed and proposes to remove them.

4. Holiday pay rate

In some situations, different rules can apply to the calculation of holiday pay for the current two separate annual leave entitlements.

For example, if an employee has normal working hours but regularly receives a commission. This stems from EU case law and subsequent decisions which have made this area quite complex.

As the government is proposing to have ‘one pot of statutory annual leave’, they are also consulting on how holiday pay should be calculated for the whole of it. The government is asking for views on whether holiday pay should reflect a worker’s normal pay, basic pay, or some other rate.

5. Rolled up holiday pay

The government is proposing to introduce ‘rolled-up’ holiday pay as an optional way for businesses to calculate and pay holiday pay for all workers.

It’s proposed that rolled-up holiday pay should be paid at 12.07% of a worker’s pay on each payslip (where they are entitled to only statutory minimum holiday).

When the worker goes on holiday, they would not receive any further pay whilst away as they would have already received their holiday pay whilst working.

Rolled-up holiday pay would have to be clearly marked on a worker’s payslip as their holiday pay.

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