REWARD
Reforms to EU laws, holiday entitlement and holiday pay
Danny Done, managing director, Portfolio Payroll, discusses the various consultation outcomes relating to record keeping requirements, annual leave entitlement / holiday pay calculations and consultations under the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations 2006
F ollowing a long wait, towards the end of 2023, the government finally released its responses to consultations on reforms to retained European Union (EU) laws and the calculation of annual leave entitlement for part-year (PY) and irregular hours (IH) workers. It also confirmed the effects of the Harpur Trust v Brazel decision will be reversed, which is sure to come as a relief to many employers. Two separate consultation periods took place regarding the changes and the government released its responses to both at the same time. The first consultation was on the calculation of holiday entitlement received by PY and IH workers, following the Supreme Court judgment in Harpur Trust v Brazel. This proposed to introduce a holiday entitlement reference period for PY and IH hours workers, to ensure their holiday pay and entitlement is directly proportionate to the time they spend working. The other consultation set out proposals for key areas of retained EU employment law that the Department for Business and Trade is responsible for and sought views on three areas of retained EU employment law which could benefit from reform: l record keeping requirements under the Working Time Regulations 1998 l simplifying annual leave and holiday pay calculations in the Working Time Regulations l consultation requirements under the TUPE Regulations. Record keeping Employers must, among other things, keep adequate records to demonstrate compliance with: l the maximum weekly working time l the length of night work l health assessments
l transfers of night workers to day work. However, a 2019 European Court of Justice decision held that employers should do more than that and record all daily working hours of all workers, which created a risk for employers not doing this, and a potentially significant administrative burden in complying. The effects of that judgment have been removed and the government will produce more guidance shortly. Holiday entitlement and pay It’s hoped that the reforms in this area will help simplify and address concerns about the calculation of holiday entitlement for employers and make entitlement clearer for all IH workers, including PY workers and agency workers. Rolled-up holiday pay is when an employee is paid holiday pay at the same time as they receive basic pay, so they’re ‘rolled’ together. It has long been unlawful to use rolled-up holiday pay due to historical case law. The government has, however, confirmed in its consultation response that rolled-up holiday pay for those who work IH or for PY workers can be used again for leave years commencing on or after 1 April 2024. It is to be calculated based on the total earnings over the pay period. Employers must remember, however, that they will still need to encourage workers to take their annual leave entitlement. The decision in Harpur Trust v Brazel meant that IH workers and PY workers got 5.6 weeks’ annual leave and pay per leave year even if they only worked a small number of hours in the year. The government has confirmed that the 12.07% method of calculating holiday accrual can be used for these types of workers, based on the number of hours worked in the pay
period for leave years beginning on or after 1 April 2024. Retained EU case law in relation to carry-over of annual leave when a worker is unable to take their leave due to being on maternity / family-related leave or sick leave has been restated to preserve employee rights. But emergency Covid-related rules on annual leave which were implemented in 2020 (meaning workers could carry over four weeks of leave into the next two leave years where it wasn’t reasonably practicable for them to take it because of Covid) has been removed from 1 January 2024. However, workers will still be able to use all leave accrued prior to 1 January 2024 on or before 31 March 2024. Finally, employers should ensure the following types of payment are included when calculating the normal rate of holiday pay:
l payments, including commission payments, intrinsically linked to the performance of tasks a worker is contractually obliged to carry out
l payments for professional or personal status relating to length of service, seniority or professional qualifications l payments, such as overtime payments, which have been paid regularly to a worker in the 52 weeks preceding the calculation. TUPE TUPE has also been reformed to remove the need to consult with representatives in small businesses (fewer than 50 employees) undertaking a transfer of any size, and businesses of any size undertaking a small transfer of fewer than ten employees, to allow for consultation with employees directly. This is only if there are no existing worker representatives in place. n
| Professional in Payroll, Pensions and Reward | February 2024 | Issue 97 50
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