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Reforms to holiday rights | 7 important updates for schools
Written by Jane Hallas on 30 January 2024
Calculating holiday pay has been a notoriously tricky task. However, new Regulations (which make various changes to the Working Time Regulations 1998 (WTR) as well as other legislation) may clear up some of the confusion for schools.
These Regulations came into force on 1 January. To complement them, the Department for Business and Trade has also published guidance on calculating holiday entitlement and holiday pay, focusing particularly on the rights of part-year workers and those working irregular hours.
This short blog summarises seven key takeaways. For more on the background to these changes, and what steps to take now, download our Holiday Rights Detailed Reference Guide below.
Rolled-up holiday pay
Previous EU case law ruled that rolled-up holiday pay – the practice of spreading a worker’s holiday pay over the year by adding an amount on top of their hourly rate – was unlawful. However, under the new Regulations, rolled-up holiday pay is now lawful for irregular hours and part-year workers who meet the definition in the legislation. This will apply for holiday years starting on or after 1 April 2024.
12.07% method
In the case of Harpur Trust v Brazel, the Supreme Court ruled that the widely-used 12.07% method used to calculate holiday entitlement for irregular hours workers was unlawful as it was in breach of the WTR.
The original reason why the accrual rate of 12.07% was used was because this is the statutory annual leave entitlement (5.6 weeks) expressed as a percentage of the number of potential working weeks in a year (46.4 weeks), making it a relatively easy way for employers to calculate holiday pay.
The new Regulations clarify that the 12.07% calculation method is, in fact, lawful for those irregular hours and part-year workers who meet the definition in the legislation.
What leave can carry over
In March 2020, the government introduced emergency legislation relaxing the restriction on carrying over annual leave into the next holiday year where it was not reasonably practicable for a worker to take some or all of their basic leave as a result of the pandemic. This amendment has now been removed; however, workers who still have untaken carried-over holiday under these provisions as of 1 January 2024 will have until 31 March 2024 to use it up.
The existing situations previously determined by EU case law, in which a worker may carry untaken holiday over to the next leave year, are retained under the new Regulations, and the WTR are amended to reflect the right of carrying over leave into the next holiday year where:
- A worker was unable to take holiday due to being on maternity leave or other statutory leave.
- A worker was unable to take holiday due to sickness.
- The employer has failed to recognise a right to holiday, or a right to paid holiday.
- The employer has failed to give the worker a reasonable opportunity to take holiday or has failed to encourage them to do so.
- The employer fails to inform the worker that holiday not taken will be lost at the end of the leave year.
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What to include in calculations
The Regulations also amend the WTR to reflect previous case law as to what payments to include when working out holiday pay.
This will be anything already included in the existing statutory definition of a “week’s pay”, plus:
- Payments, including commission, intrinsically linked to the performance of tasks which a worker is contractually obliged to carry out.
- Payments for professional or personal status relating to length of service, seniority or professional qualifications.
- Payments, such as overtime payments, which have been regularly paid to a worker in the previous 52 weeks.
Use it or lose it
The WTR are amended to confirm that if a worker clearly chooses not to use their entitlement to annual leave prior to it expiring, they lose the entitlement. However, employers must ensure they remind staff to take any remaining leave before the end of the holiday year.
Basic versus additional leave
During consultation, the government signalled its intention to merge basic leave entitlement (4 weeks) and additional leave entitlement (1.6 weeks), maintaining the same amount of annual leave overall, i.e. 5.6 weeks. However, this did not happen. The two types of leave will be retained and remain separate, except for irregular hours and part-year workers who meet the definition in the legislation.
Further guidance awaited
For all schools, clarification is awaited in respect of whether term time only workers who are paid all year round on a 1/12th basis per month come under the definition of part-year workers in the amended WTR.
This is because the definition in the WTR states that a worker is a part-year worker, in relation to a leave year, if, under the terms of their contract, they are required to work only part of that year and there are periods within that year (during the term of the contract) of at least a week which they are not required to work and for which they are not paid. This includes part-year workers who may have fixed hours, for example teaching assistants who only work during term time, and who are paid only when working. On one interpretation (and bearing in mind the purpose of the consultation to address the Harper Trust v Brazel case), this appears to include part-time workers, as there are periods for which they are not paid.
However, the guidance gives an example of a term time only worker who is paid an annualised (flat) salary over 12 months but has periods of time that last more than one week where he is not working. The guidance says such a worker would not qualify as part-year worker if their contract reflects that there are weeks where they are not working and there are no weeks where they do not receive pay. It states that such a worker would need to not receive pay during the periods they are not working, in order to be classified as a part-year worker.
For schools who are subject to the Green Book or similar, further guidance is awaited as to how the new legislation will impact their term time only and irregular hours staff, if at all.
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In regard to holidays, our team of education specialists can help your school ensure all categories of workers are receiving their correct holiday entitlement and pay to reduce your risk of claims. We can also advise on how to amend terms and conditions to reflect the recent changes, keeping you compliant.
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