30 November 2023
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Holiday Pay Overhaul: 5 key changes for employers in Great Britain

To The Point
(5 min read)

The Government has announced changes to the calculation of holiday pay, due to come into force for England, Wales and Scotland on 1 January 2024 under the draft Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (Regulations). The Regulations define 'normal pay' and clarify when carryover of holiday will be permitted. For holiday years beginning on or after 1 April 2024, the Regulations introduce a new method of calculating holiday entitlement for irregular and part-year workers and allow employers to pay rolled-up holiday pay. 

This is the second in a two-part series of holiday pay articles. Click here to view Holiday Pay Overhaul (Part 1): Supreme Court extends liability for UK holiday pay claims

With such a lot to keep up with, our infographic summarises the 5 key changes to holiday pay for employers, with more detail below.


Earlier this year, the Government consulted about the best way to calculate holiday entitlement for part-year and irregular hour workers. This followed the Supreme Court's ruling in Harpur Trust v Brazel, [2022] UKSC that holiday pay should not be pro-rated for part-year workers and that workers or employees on permanent contracts who only work for part of the year are entitled to 5.6 weeks' paid holiday per year, just like workers or employees who work all year (see our article here).  

The Government also consulted on areas of retained EU employment law, one of which was simplifying annual leave and holiday pay calculations to ensure they are tailored to the needs of the UK economy and help create conditions for growth.

On 7 November 2023, the Government responded to both consultations in the same response and laid new draft regulations before Parliament, due to come into force on 1 January 2024.  

5 Key Changes for Employers:

Unlawful deductions from wages claims
Two 'pots' of holiday entitlement maintained and defining 'normal pay'
Carryover of holiday
Irregular hours and part-year workers
Rolled-up holiday pay

What should you do now?

Calculating holiday pay has always been complicated, and whilst the Regulations are welcome and provide some clarity, questions still remain.  Whether the Government will have time to amend the draft Regulations to address some of these uncertainties before they come into force in January 2024 is unclear.  In the meantime, we suggest taking the following steps to assess the impact on your business.

  1. Check your holiday year – when does this run? The changes relating to irregular and part-year workers will apply to holiday years beginning on or after 1 April 2024, which means that they will take effect at different times for different employers. For example, they will be effective from 1 January 2025 for employers who base their holiday year on the calendar year. 
  2. Analyse your irregular hours and part-year workers. Who will be caught by the new definition of irregular hours or part-year workers?  If you want to pay rolled-up holiday pay for these workers, changes to their contracts will be required. Also, the method of accruing holiday in hours at the end of each pay period for irregular and part-year workers means that you will have to decide how to handle requests to take more holiday than has been accrued at any given point in the year, as well as how these workers will be able to take their holiday that only accrues on the last day of the 12th pay period of the holiday year, given that it has to be taken in the same holiday year. 
  3. Review your contracts, policies and procedures. Do they need amending to comply with the new rules? Are you capturing overtime, commission and allowance payments in at least 4 weeks of holiday pay? To head off carryover requests, ensure that you are reminding workers to use their holiday entitlement and that you are giving them enough opportunity to take it. 

Next Steps

For advice and assistance in reviewing your arrangements, please get in touch.

To the Point 

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