Legal bitesize with Nithin Fransis

Speaker: Nithin Fransis, Legal and Compliance Adviser

Nithin Fransis: Hi, my name is Nithin Fransis and I am a legal and Legal and Compliance Adviser at the REC. Today, I will be going through holiday pay and the new legislation that will be coming into force. I will also be covering what members should be doing regarding holiday pay for workers at the end of the leave year.

Nithin Fransis: Firstly, let's look at a history of holiday pay. During the summer of 2022 the Supreme Court concluded on the case of Harper Trust V brazel. This case related to a teacher engaged on an overarching contract of employment, albeit a zero hour contract upholding the decision of the court of appeal before it. The Supreme Court ruled that part year employees with regular hours of work could not have their holiday entitlement pro-rated in proportion with the hours they work and they were entitled to the entire 5.6 statutory minimum. This led to an unfair outcome for part time employees who had regular hours but worked more hours than part year workers having less holiday entitlement than part year workers because their holiday entitlement could still be pro rata. The decision had an immediate impact on employment, businesses that either used an employment model for their temporary workers or worked with umbrella companies. Although the decision appeared to relate to part year workers on a contract of employment, there were unanswered questions regarding whether the case can be interpreted to cover temporary workers under a contract for services, even where there's no overarching agreement between the employment business and the worker. Additionally, we saw the case of Robinson steel V PD retail services. and other cases, the ECG held that the practice of rolling, rolling up holiday pay is unlawful as it did not comply with the provisions of the working time directive concerning paid annual leave. The court expressed that the aim of holiday pay is to enable a worker to take his or her leave. And under article seven of the working

Nithin Fransis: working time and under the and under article seven of the working time directive, a worker must continue to receive his or her annual remuneration during annual leave. The working time directive does not expressly state when the payment of annual leave must be made. However, the aim of the payment is to ensure that the worker is in the same position in relation to remuneration during his or her annual leave as he or she is in is during periods of work. However, this in this decision, although road up holiday pay was explained to breach the working time directive. The court has considered that a person making such payments would be, would have a defense if the payments had been transparently and made by agreement to tackle these confusion In January 2023 the government launched a consultation on how it could address the impact of Harper Trust. v Brazel through amendments of holiday provision under the working time regulation. 1998 a second consultation was also launched later on in the year on reforms to retained EU employment law where the government expressed introducing rolled up holiday pay as an option for all workers.

Nithin Fransis: So what is changing on the eighth of November 2023? The Secretary of State for Business and Trade introduced the draft employment rights amendment revocation transition provision regulations 2023. This updates the working time regulations. 1998 and introduces changes to the calculation of holiday pay and leave for irregular hour and part year workers where holiday pay would be calculated according to the working time regulations. 1998 the draft regulation introduced the following key changes, a definition of irregular hours worker, a definition of part year workers, a statutory right to carry over leave that a worker was unable to take in the leave year in which it was accrued due to sick leave, a statutory obligation to inform a worker of the entitlement to leave/pay instead of leave, to provide them with the opportunity to take the leave and to inform a worker that any leave not taken by the end of the leave year will be lost. It will also be lawful to pay rolled up holiday pay to irregular hours workers and part year workers using the 12.07 accrual method. A 52 week reference period for the calculation of holiday entitlement and pay for irregular hour workers and part year workers when they are on statutory leave or on sick leave will be implemented. Lastly, a revocation on the working time Coronavirus amendment regulation 2020. When implemented the draft regulation will not take effect in Northern Ireland. Therefore, the position on the calculation of holiday pay in Northern Ireland remains unchanged. Who will be affected by this. By the these changes to the calculation of holiday leave and pay workers are who are considered under the new working time. Amendments are irregular worker, irregular hours workers and part year workers. A worker is in scope of the definition of a regular hours worker. If the number of paid hours that they will work in each pay period during the term of their contract in that year is under the terms of the contract wholly or mostly variable. A part year worker is a worker who required to work only part of the year and there are periods within the year during the time of the contract of at least a week which they are not required to work and for which they are not paid.

Nithin Fransis: Ireland remains unchanged who will be affected by this. uh by the these changes to the calculation of holiday leave and pay workers are who are considered under the new working time. Amendments are irregular worker, irregular hours workers and part year workers. A worker is in scope of the definition of a regular hours worker. If the number of paid hours that they will work in each pay period during the term of their contract in that year is under the terms of the contract wholly or mostly variable. A parte worker is a worker who required to, to work only part of the year and there are periods within the year during the time of the contract of at least a week which they are not required to work and for which they are not paid.

Nithin Fransis: When do these changes take effect? The amendments to working time regulation? 1998 come into law on the first of January 2024. However, certain provisions take effect later on in the year for those who leave here start on or after 1st April 2024. The Department of Trade will also be updating its guidance on the working time regulations 1998 and this guidance is set to be published on the 1st of January 2024 roll up holiday pay and the introduction of the 12.07 accrual method will take effect on the 1st of April 2024. This means that the changes will impact irregular hour workers and part year workers whose leave years start on or after 1st April 2024 allowing them to accrue holiday leave at the rate of 12.07 of the hours worked by a worker in each pay period and be to be paid, rolled up holiday pay at the rate of 12.07 of their pay in each pay period. Additionally, from the first of January 2024 workers can no longer accrue COVID-19 carry over leave. However, workers may still have leave to use. So workers still will still be able to use or leave accrued prior to First of January 2024 on or before 31st, March 2024.

Nithin Fransis: So what do members do in the interim members engaging under a contract for services can start applying the 12.07 accrual method and roll up holiday pay to workers on assignments starting on or after first of April 2024. However, in the interim REC advises that members should calculate holiday entitlement by using the government calculator to work out pay. Members should do so in accordance to section 221 - 224 of the Employment Rights Act 1996. This involves calculating at the time of the worker takes leave by looking back at the last 52 weeks or less if they have been with you for that period, taking out any weeks where they have not earned any remuneration or received statutory payments adding in additional weeks to a maximum of 104 to give you a full 52 weeks where applicable. You add this together and divide by the number of weeks you are using to get the average weekly pay.

Nithin Fransis: get the average weekly pay can work workers carry over the accrued but not taken leave for the following leave year. All workers employees and agency workers are entitled to at least 5.6 weeks paid holiday each year, this equates to 28 days. Normally workers must take their holiday within the holiday year which runs either 12 months from the anniversary of the start of their employment or as per the holiday year specified in their contract. Many employers have a holiday year that runs from the first of January to the 31st of December. Usually if a work does, if a worker does not take all their leave within the holiday year, they may lose it as employers are not obliged to allow workers to roll unused leave into the next year. The established expected exceptions, the established exceptions to this include where a worker has been unable to take their holiday because of long term sickness, absence or maternity leave and in circumstances and in certain circumstances where the employer has not done enough to get their workers to take their leave before these draft amendments to the working time regulations, 1998 have take effect. All members should ensure the workers are informed clearly of their leave entitlement, ensure that workers are informed clearly of when the leave year runs to and from remind workers throughout the leave year of their remaining entitlement and that they should take it by the end of the year or they will lose it.

Nithin Fransis: Why is it important to remind workers of their leave? It is important that members remind workers of their right to leave due to risk of claims of unpaid holiday pay. Following the outcome of the Supreme Court case of Chief Constable of Police Services of Northern Ireland versus Agnew This is particularly important at this time of year as it's potentially the end of most employees leave/fiscal year. In the Agnew judgment. The Supreme Court determined that workers could bring claims for a series of underpayments and non-payment of pay including holiday pay even where there are gaps of more than three months between underpayments/non-payment of pay. This means that members in the UK are exposed to the risk of employment tribunal claims for holiday pay going back to two years due to the two year backstop implemented under the deduction of wages limitation regulations. 2014. Members in Northern Ireland run the risk of employment tribunal claims for holiday pay going back as far as the enactment of the working time regulations. 1998 as the wage limitation regulation, 2014 did not apply in Northern Ireland.

Nithin Fransis: If a temporary worker does not take their holiday, do you then have to pay them the holiday pay for this? The working time regulations 1998 currently restrict employers from paying workers in lieu of the statutory minimum holiday entitlement, except on the termination of employment. Therefore, if a worker fails to take the holiday through their own failure, there is no obligation to pay the worker for the untaken holiday. This does not mean members should just bank any money charged to the client for holiday pay, which temporary worker is entitled to. Members should encourage temporary workers to take their leave, especially from a health and safety and well being perspective. Workers on a contract for services are entitled to receive holiday pay for accrued holiday pay They did not take at the end of each assignment. If your business has failed to do this, you should allow the workers the option to take leave and to pay the workers when they are on leave or to pay this out. Not addressing this. This not addressing this leaves the business vulnerable to holiday pay claims considering Agnew to conclude the em, the em to conclude the amendments to working time regulation in 1998 which come into force on the January 1st 2024 introduce a legal right for employers to elect to pay part year workers and irregular hour workers whose leave year starts on or after 1st April 2024 to be rolled up holiday pay as well as to remind workers of their holiday entitlement. This category of workers will accrue holiday leave at the rate of 12.07 of the hours worked by a worker in each pay period. And holiday pay will be paid at the rate of 12.07 of the remuneration received in each pay period. Rolled up holiday should be clearly shown on each worker's payslip. If you would like further information on the changes to holiday pay or guidance on what to do in the interim, please visit our website which contains various publications on holiday pay. I have also provided various links to some guidance below. Thank you.