Employment law changes from 1 January 2024

The Government has announced that a new draft statutory instrument, the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 is expected to come into force on 1 January 2024.

On 8 November, the Government published responses to two separate consultations on holiday entitlement and reforms to retained EU employment law. These responses confirmed some changes that the Government had proposed would go ahead and to implement these, it has also published draft regulations which are intended to come into force on 1 January 2024. 

These changes include:

• Simplifying holiday pay calculations by making rolled-up holiday pay (12.07% of pay) lawful for part-year workers and those working irregular hours;
• Clarification that part year and irregular hours workers don’t have an entitlement to 5.6 actual weeks holiday irrespective of the number of days/weeks worked in the year (as had been held in a recent Supreme Court case) but instead accrue annual leave at a rate of 12.07% of the numbers of hours worked in a pay period.
• Restating certain pieces of retained EU case law, which allows the carry over of:
  • All statutory annual leave to the following year when a worker is unable to take their leave due to family related leave;
  • 4 weeks per year where a worker is unable to take their leave due to sickness; and
  • Where the worker has not been given the opportunity to take the leave or the employer has failed to inform them that any leave not taken, and which cannot be carried over will be lost.
• Defining ‘normal remuneration’ for holiday pay purposes to include commission payments and other payments (including regular overtime);
• Removing the additional working time record keeping requirements; and
• Allowing businesses with less than 50 employees doing TUPE transfers of any size, and businesses of any size undertaking a TUPE transfer of less than 10 employees to consult their employees directly if there are no existing representatives in place.

Comment and Implications for Employers

Employers should conduct an audit to ensure its calculation of holiday pay is consistent with the new definition of normal remuneration, although as had been the position under case law, this is only for the 4 weeks leave. The Government had consulted on bringing together the 4 weeks leave and additional 1.6 weeks leave into one entitlement but have decided not to take this proposal forward.

We would also encourage employers to review holiday accrual for irregular hours and part-year workers if they engage in these types of workers and consider whether they want to use rolled up holiday after the legislation comes into force. This allows employers to pay an additional amount  based on the hours worked in any pay period whether or not that holiday has been taken and is likely to be administratively easier for these types of workers. 

Further, employers who decide to adopt rolled-up holiday pay for the irregular or part-year workers will need to make sure their contractual documentation is updated accordingly. This includes ensuring employers are clear on payslips what portion is normal pay and what represents the rolled-up holiday pay. This review should also make sure the holiday entitlement of irregular and part-year workers is correct and reflects the changes to the basis of accrual now the position as set out in the Supreme Court decision of Harpur Trust v Brazel will be reversed.

If you have any questions on this or any other area of Employment law, please get in touch with a member of our Employment Team.