Holiday pay and entitlement reforms

HR, News, Payroll,

The Employment Rights Regulations 2023 came into force on the 1st January, to simplify holiday pay and entitlements. They ensure the UK retains European laws that Brexit theoretically released us from, but also make several changes.

These changes affect rates of holiday pay and annual leave. They also cover irregular hours and part-year workers, accrual of leave carried over from COVID-19 and rolled-up holiday pay.

Holiday entitlement

The Regulations define what an irregular hours or part-year worker is and makes changes around the way their holiday entitlements for holiday years beginning 1st April 2024 and onwards are accrued.

Employers will need to calculate holiday entitlement for such workers at 12.07% of the hours worked in any pay period. This does not apply to the calculations for regular hours workers.

Holiday pay

The Regulations specify that all full-year workers are legally entitled to 5.6 weeks of paid statutory holiday entitlement per year. These are split into two pots.

  • Four weeks – the original EU leave entitlement – must be paid at the employee’s ‘normal’ rate of pay and the regulations now specify that this includes overtime pay, commission and allowances.
  • The remaining 1.6 weeks – an addition made by the UK – only have to be paid at the employee’s ‘basic’ rate of pay.

The Government has produced guidance containing examples and calculation methods based on the legal minimums set out in the Regulations.

It may be possible that your contracts provide for more holiday than the statutory minimum. In this case you’ll need to refer first to your existing contracts, and potentially to your HR advisor. 

You can see the guidance on the website.

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