New regulations announced this week could see temp and contract workers’ average wages boosted by an extra £1,000 per year.
The new rules will benefit workers with irregular or zero hours, or those working part of the year, as they will now be allowed to receive ‘rolled-up’ holiday pay.
Rolled up holiday pay is a system whereby workers’ holiday pay is wrapped up in their basic pay, rather than employers paying them when their holiday is actually taken. This means they get paid a slightly higher hourly rate and the business does not need to calculate a worker’s holiday entitlement.
Currently rolled-up holiday pay is unlawful, following a 2006 European Court ruling which expressed concerns that workers may not be incentivised to take leave as they could earn more holiday pay by staying at work.
The government had initially proposed to introduce rolled-up holiday pay as an option for all workers, but has decided it would offer little benefit to employees with regular hours.
New year regulations
Starting from January 1, 2024, these regulations will take effect, bringing about significant changes to holiday laws that will impact a large number of employers.
Additionally, a fresh system for calculating holiday entitlement will be introduced.
This quick implementation follows the government’s release of two sets of proposals earlier this year aimed at reforming holiday rights. The government has now provided its response and draft regulations.
The new Employment Rights Regulations 2023
- Retaining two distinct ‘pots’ of annual leave and existing rate of holiday pay (4 weeks at normal rate of pay and 1.6 weeks at basic rate of pay)
- The introduction of rolled up holiday pay for irregular hours workers and part-year workers, which would include some agency workers
- Plans to legislate an accrual method to calculate entitlement at 12.07% of hours worked in a pay period for irregular hour workers and part-year workers in the first year of employment and beyond
- The simplification of TUPE requirements and reduction of administrative burdens for small businesses
Tania Bowers, global public policy director at The Association of Professional Staffing Companies (APSCo) said: “We have highlighted for years that rolled-up holiday pay is necessary and will protect agency and umbrella workers. We’re pleased to see that our recommendations have been seriously considered and adopted in this consultation response, including the rate of holiday pay and the simplification of TUPE requirements.
“The plans outlined are, in our view, the only fair way to pay irregular workers and ensure they are no longer at risk of losing accrued holiday pay due to the way they are employed. However, it is now important for recruiters and umbrella companies to assert to workers and end clients that individuals must take the holiday or pay they are owed and the Working Time Regulations.”
