Changes to Holiday Pay and TUPE changes from January 2024

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Changes to Holiday Pay and other Employment Law changes 2024

There are some significant changes to holiday pay and employment law due in 2024. Is your business ready?

In this blog, we talk about some of the changes in employment law that are coming into effect in 2024 and what employers need to do to prepare.

Some of the first changes will impact holiday pay and annual leave, working time and rights/obligations under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

Holiday pay for irregular and part-year workers

“Irregular hours workers” and “part-year workers” will be removed from the scope of the existing holiday entitlements and subject to new regulations:

• Holiday will accrue based on 12.07% of the hours worked in the previous pay period; and
• Employers may choose to implement rolled up holiday pay, where holiday pay (at the rate of 12.07%) is paid as an uplift to the normal rate of pay at the time the work is done, instead of being paid at the time holiday is taken.

These rules will only apply to irregular hours and part-year workers (as defined below), and only in relation to leave years which start on or after 1 April 2024.

This should make it easier for employers to calculate holiday entitlement for these workers and ensures their holiday entitlement better reflects the hours they work across the year.

Carry-over of holiday entitlement

The latest legislation codifies the effect of existing EU case law regarding carry-over of holiday.  This confirms, with effect from 1 January 2024, the existing position that holiday can be carried over in the following situations:

• Where a worker was unable to take holiday due to being on maternity leave or other statutory leave.
• Where a worker was unable to take holiday due to sickness.
• Where the employer has failed to recognise a right to holiday, or a right to paid holiday.
• Where the employer has failed to give the worker a reasonable opportunity to take holiday or has failed to encourage them to do so.
• Where the employer fails to inform the worker that holiday not taken will be lost at the end of the leave year.

This change will make understanding the principles easier as previously they were only documented in case law not legislation.

Holiday pay calculations

EU case law has for a long time been confusing about the calculation of holiday pay.   It concluded that holiday pay should not be calculated based on basic pay only but on the normal pay the worker actually receives.  This only applied to the 4 weeks of annual leave provided for by EU legislation; not the additional 1.6 weeks UK law requires.

The new rules aim to restate and codify these principles but continues to only apply to the 4 weeks holiday that the EU has historically guaranteed and not the extra 1.6 weeks the UK guarantees to workers as a minimum holiday entitlement on top of this (known as regulation 13A holiday).

Holiday pay for the first 4 weeks of statutory holiday pay must be calculated based on new “normal remuneration” provisions. These now specifically list the types of payments that should be included in these calculations, i.e. commission, overtime.

The remaining 1.6 weeks statutory holiday will continue to be subject to the old definition of a week’s pay which is set out under the Employment Rights Act 1996 depending on whether the worker works normal working hours and other factors.

Working Time Regulations 1998 (WTR 1998) – clarification on record keeping

The new provisions clarify, with effect from 1 January 2024, the record keeping requirements under WTR 1998 to maintain the requirement to keep “adequate” records to who compliance with the 48-hour working limit on the average working week, and the night work rules but not necessarily keep a full record of all daily working hours.

Working time, holiday pay and accrual are complex areas for employers.  It is important that they are handled correctly to comply with both existing legislation and also these new provisions of employment law.   If you would like to discuss any queries about holidays for employees, Bowcock & Pursaill’s Employment Law specialist, Clare Thomas, can offer practical advice and guidance to ensure your business adheres to all new legislation.

TUPE changes

TUPE applies to protect employees and their benefits if they transfer from one employer to another either by way of a business transfer (e.g. sale/purchase of assets) or a service provision change (e.g. work carried out in-house is carried out by an external third party).

One of the obligations under TUPE is for employers to inform and consult with employees via appropriate representatives.  Previously, only micro businesses with fewer than ten employees were permitted to inform and consult affected employees directly if there are no existing appropriate representatives in place (for example, if there is no recognised trade union).  Otherwise, appropriate representatives needed to be elected by the employees if none were already appointed and this adds to the complexity of the TUPE process.

The changes, which apply to TUPE transfers occurring on or after 1 July 2024 allow for the removal of the requirement to elect employee representatives for:

• Employers with fewer than 50 employees.
• Employers of any size involved in a transfer of fewer than ten employees.

In either case, the employer will be able to consult directly with employees, where no existing employee representatives are in place.

It remains important for business owners to consider if TUPE applies to any service provision change or business transfer  and to ensure it remains fully compliant with the TUPE legislation.  Failure to do so could lead to penalties.

If you’re not sure if TUPE applies to situation or require advice on complying with TUPE, our employment law experts can help.