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HR & EMPLOYMENT LAW Jackie Le Poidevin, Editor-in-Chief, HR Adviser |
Discover the Changes to Holiday Pay and Entitlement Taking Effect Next Year
Earlier this month, the government published draft regulations reforming the rules on holiday entitlement and pay, which are due to become law on 1 January 2024. Here, we summarise the hotly anticipated provisions on the legality of the 12.07% shortcut for calculating entitlement and pay. In the next Ask the Experts Email Update, we’ll look at what other proposals the Government has unveiled.
What’s Changing
The draft regulations have been published as part of the Government’s response to its recent holiday entitlement and holiday pay consultations. They state that for holiday years commencing on or after 1 April 2024:
- Irregular hours and part-year workers will accrue statutory holiday entitlement on the last day of each pay period at a rate of 07% of the hours they have worked during that pay period (rounded up or down to the nearest hour). This will put an end to term-time-only and other part-year workers building up disproportionately high amounts of holiday entitlement following the Harpur Trust v Brazel case.
- This accrual system will be subject to a cap so workers can’t accrue more than 28 days’ statutory holiday in 1 year.
- It will be lawful to give irregular hours and part-year workers rolled-up holiday pay. This involves adding an amount to each pay packet for the holidays the worker has accrued. This must be paid at a rate of 12.07% of all pay for work done (assuming you only offer the minimum 28 days’ holiday). The worker then doesn’t get any further holiday pay when they take annual leave.
- You must give rolled-up holiday pay at the same time as you pay the person for the work they’ve done and itemise it separately on the payslip.
- Special (more onerous) rules apply if a worker has been on sick leave or family-related leave. In this case, you’ll need to use a 52-week averaging mechanism.
What to Do Now
These are 3 steps to think about taking now:
- Decide whether you wish to roll up holiday pay for relevant workers. This has been technically illegal since a 2006 ruling but is the easiest way to deal with holidays when people don’t work standard hours each week or month. This change won’t be obligatory, though, so if you currently use the 52-week averaging method to calculate holiday pay, think which approach you’re going to opt for.
- If you already roll-up holiday pay for some workers, check they will all be eligible under the new rules. Rolling up will only be permissible for:
- Irregular hours workers: defined as those whose contractual hours in each pay period are ‘wholly or mostly variable’.
- Part-year workers: defined as those who have a period of at least a week in a leave year when their contract states they’re not required to work and they’re not paid.
- Check you understand which elements of pay should be included for the purposes of the 12.07% calculation.
- If you intend to roll up holiday pay, think how you’ll ensure workers actually take their full holiday entitlement. It won’t be enough just to give them the money. In practice, you may still need to discuss with casual workers which days or part days you’re earmarking as holiday and make sure they’re taking sufficient time off.
- Consult staff if necessary. If (say) you’re planning to reduce term-time-only workers’ holiday entitlement as a result of these changes, you may need their written consent (depending on the wording of their contract). In the worst case, you may need to dismiss and offer to re-engage them if they object to the change in their terms and conditions.
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HEALTH & SAFETY Emma Lampka, Editorial Board Member, Health & Safety Adviser and Risk Assessment & Compliance |
Your 5-step Guide to Protecting Your Home Workers
Home working can be a double-edged sword. Positively, it provides the employee with flexibility in their working arrangements, childcare, reduced work distractions and work life balance. However, it can have negative effects such as stress, lack of mental wellbeing and a feeling of isolation and being disconnected from the rest of the working team. As an employer, you have the same health and safety responsibilities for people working at home as for any other worker.
Although there is no specific legislation for home working, the principles of the Workplace (Health, Safety and Welfare) Regulations 1992 should be applied. The HSE have developed guidance for employers and employees. This guidance applies to those who:
- Work at home long term.
- Routinely split their time between their workplace and home (sometimes called hybrid working) most of the time.
5 Key Steps to Successful Home Working
To protect your home workers while working at home, follow our steps below.
- Include your home workers in your risk assessment process.
It’s important to have a balanced and proportionate approach for home workers. In most cases you do not need to visit them to ensure their health and safety but you should make sure they have a healthy and safe environment to work in. Developing a risk assessment checklist for your employees to complete and return will enable you and your employee to identify any areas within the home or home working arrangements that may need improving.
- You must protect workers from stress at work.
You can do this by doing a risk assessment and acting on it. This applies equally to home workers as any other workers. Home workers will face many of the same issues as any other worker but it can be more difficult to provide adequate support and maintain social links. People who are deprived of social contact through work can feel isolated or disconnected, bringing on pressure and stress or aggravating pre-existing mental health problems.
- Keep in touch with your home workers regularly.
You should talk to your workers about their working arrangements, as working from home may not be suitable for everyone. For example, some people may not have an appropriate place to work or may prefer to come into the workplace for wellbeing, mental health or other reasons.
- Ensure your home workers are using computers and laptops safely at home.
Your home workers can complete a self-assessment provided they have been given suitable training. Where they use display screen equipment (DSE) in the home and office, your assessments should cover both situations. You should ensure that:
- Home workers can achieve a comfortable, sustainable posture while working with DSE.
- Any equipment provided is safe and suitable for use.
They may not necessarily need office-type furniture or equipment at home to achieve a good posture. Equally, a worker’s own furniture or equipment may not be suitable or sufficient. Use a DSE assessment to help you decide what is needed for your own workers’ situations and circumstances.
- Reduce the risks identified in your home workers’ DSE assessments, so far as reasonably practicable.
This means applying a balanced approach between the risks and the time, cost, effort and inconvenience of implementing controls for those identified risks.
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PAYROLL Sarah Bradford, Editor-in-Chief, Pay & Benefits Adviser |
How the Chancellor’s Autumn Statement 2023 Will Affect Your Business
The Chancellor presented his 2023 Autumn Statement on 22 November 2023. As far as payroll is concerned, the key announcements were a fall in the main primary rate of Class 1 National Insurance from January 2024 and an increase in the National Living Wage from April 2024.
National Insurance Changes
The Chancellor delivered on National Insurance reductions for both the employed and the self-employed.
As far as employees are concerned, the main primary rate, which is payable on earnings between the primary threshold (set at £242 per week; £1,048 per month and £12,570 a year) and the upper earnings limit (set at £967 per week, £4,189 per month and £50,270 per year), is to be reduced from 12% to 10% with effect from 6 January 2024. So, rather than applying from the start of the 2024/25 tax year, the change will be made in the 2023/24 tax year, taking effect from Month 9.
There is no change to the additional primary rate, which remains at 2% on earnings in excess of the upper earnings limit.
The cut in the main primary Class 1 rate will be worth £450 in 2024/25 to an employee on an annual salary of £35,400.
Employer (secondary) Class 1 contributions are also unchanged, remaining at 13.8%.
What You Will Need to Do
The in-year cut to the primary Class 1 rate will mean that employers will need to make changes to their payroll systems to ensure that employees benefit from the reduction from January 2024. It is important than payroll software is updated before running the payroll where the pay date is on or after 6 January 2024.
If you are unable to update your payroll software in time to take effect for January payrolls, you will need to rectify the position in the remaining months of the 2023/24 tax year so that employees receive the reduction to which they are entitled and pay the correct National Insurance for the 2023/24 tax year.
The rate cut will also impact on directors who have an annual earnings period and who will pay National Insurance at a composite rate for 2023/24 of 11.50%.
Veteran’s Upper Secondary Threshold
Where an employer takes on an armed forces veteran in the first year of their first civilian employment since leaving the armed forces, the employer only has to pay secondary Class 1 National Insurance contributions on the veteran’s earnings to the extent that they exceed the veterans upper secondary threshold.
The veterans upper secondary threshold was introduced for a limited period and was due to come to an end at the end of the 2023/24 tax year. However, it is being extended for a further year and will continue to apply for the 2024/25 tax year.
National Living Wage
The National Living Wage (NLW) is to be increased by 9.8% from its current level of £10.42 an hour to £11.44 an hour from 1 April 2024.
The NLW is currently payable to workers aged 23 and older. However, it is to be extended to workers aged 21 and 22 from 1 April 2024, so that from that date all workers aged 21 and above must be paid at least £11.44 per hour.