The new 2007 holiday guide

25 June 2007

The Government estimates that around one-fifth of the working population will benefit from its plans to increase the statutory minimum holiday entitlement. The impact will vary amongst employers but organisations of all sizes will be affected. Here’s a guide to the new proposals.

The Government has recently published its response to the Increasing the Holiday Entitlement - A Further Consultation and has now laid the draft Working Time (Amendment) Regulations 2007 before Parliament. The Regulations are expected to be approved by early July, to give employers 3 months notice of the changes.

The most significant change is the provision of 1.6 weeks Additional Leave above the current 4 weeks, subject to a maximum of 28 days statutory leave. As a consequence, those working a 6 day week will not benefit as greatly and any entitlement above the statutory minimum will depend on the terms of the contract. The increase will come into effect in two stages. The first increase of 0.8 weeks will apply from 1 October 2007 and the second 0.8 weeks, which was originally proposed for 1 October 2008, will now come into force on 1 April 2009.

The additional 8 days are intended to ensure that workers receive paid time off for public holidays in addition to their rights to four weeks' holiday. However, in the interests of flexibility for employers, the Government has not created an obligation on the employer to give time off on such occasions and workers can take the additional leave as and when required, subject to the normal notice provisions under the Working Time Regulations. Employers can however include any entitlement to paid public and bank holidays in the overall entitlement to statutory holiday but should make this clear in the employment contract. You should expressly state that staff are required to take holiday on these days, a practice already used by many employers during shut down periods, particularly at Christmas. However, employers will also need to consider the approach to take in situations where more than 8 bank holidays occur in a year. In Scotland there are 9 official bank holidays and, although rare, Easter can fall twice in the same year.

The Regulations also provide that part time workers are entitled to receive a pro rata amount of the Additional Leave according to the proportion of hours worked compared to a full time worker. This will now mean that, where public and bank holidays are included in the entitlement to statutory holiday, all part–timers will receive a pro rata paid entitlement irrespective of the days on which they work. Whereas, currently, it is possible for employers to have a policy of only giving paid time off for bank holidays falling on the employee’s normal working day, which creates a disparity with those who do not work on a Monday.

As employers will continue to not be able to make a payment in lieu of the additional statutory holiday except for on termination. However, the Regulations do introduce some new provisions including:

Allowing for some or all of the Additional Leave to be carried over to the following leave year under a relevant agreement, which can be either a collective or workforce agreement or an individual employment contract
Removing the requirement to round up a worker’s statutory holiday entitlement in the first year to the nearest full day so that those that join part way through the leave year can receive fractions of a week’s holiday

Employers will be exempt from the Regulations if, at the 1 October 2007, they provide each worker with an annual leave entitlement of 1.6 weeks or 8 days (whichever is the lesser) in addition to the 4 weeks statutory holiday, subject to following conditions:

The 1.6 weeks or 8 days is paid at the rate of a week's pay for each week of holiday
The leave cannot be paid in lieu except on termination
The leave can only be carried over into the following year

Employers who are not exempt will need to calculate the proportion of the additional holiday entitlement to be given to workers according to the employer’s leave year. Holiday leave years which are based on the calendar year January to December will result in an increase of 1 day for the current leave year. Holiday leave years which run from April to March will result in an increase of 2 days for the current leave year. The DTI has said that it will provide an online calculator to enable employers and workers to determine the correct amount of holiday to be awarded during the transitional phases. As part of the transition, the Regulations also enable employers to make a payment in lieu of the additional holiday up until 1 April 2009.

Employers should not assume that just because they give employees four weeks or more holiday plus bank holidays that they need to do nothing. Employment contracts should be reviewed to avoid any ambiguity and the organisation’s practices in relation to part time and casual workers should also be checked for compliance.