• Navigating leave entitlements under the Working Time Regulations can be complex, especially with recent updates. This guide explains the new carry-over rules for unused leave, helping HR professionals and business owners ensure compliance and fair treatment for employees.

    Guidance on the carry-forward of leave

    As a general rule, statutory holiday can only be taken in the leave year to which it relates, on a ‘use it or lose it’ basis. However, in January 2024 amendments were made to the Working Time Regulations which provide for holiday to be carried forward into the next leave year in certain circumstances. The changes reflect existing case law but are now enshrined in legislation as follows:

    • Where a worker is unable to take some or all of their leave, as a result of taking a period of maternity or other family-related leave.
    • Where a worker is unable to take some or all of their leave as a result of taking a period of sick leave. In this case, the carried-forward leave must be taken within 18 months of the end of the leave year to which it relates.
    • Where an employer fails to:
      • recognise a worker’s right to annual leave or paid annual leave
      • give the worker a reasonable opportunity to take leave or encourage them to do so
      • inform the worker that leave not taken by the end of the leave year will be lost.

    In these cases, workers can carry forward any untaken leave and will continue to be able to do so until the end of the first full leave year in which there is no such failure by the employer.

    Just to complicate matters, the above rules apply to the four weeks of leave originally derived from the Working Time Directive. Workers are also entitled to a further 1.6 weeks’ leave under the Working Time Regulations. This additional leave can only be carried forward to the next leave year:

    • if a worker is unable to take some or all of the leave as a result of taking a period of maternity or other family-related leave
    • where carry-over is agreed under the terms of a relevant agreement (usually the contract of employment or collective agreement).

    What do employers need to consider following the Working Time Regulations update?

    As a starting point, employers should review their leave policies and contractual provisions to ensure that they comply with the carry-forward rules. Employers will also need to put in place a system to ensure that all workers are reminded of the need to take their holiday before the end of the leave year or they will lose it. Employers must also ensure that workers are given a reasonable opportunity to take their leave. We suggest that this is done at least once a year and suitable records are kept.

    For completeness, if you give your workers more than 5.6 weeks’ leave each year (including bank holidays), you can reach a separate agreement with them about the carry-forward of any additional leave. Usually employers limit carry-forward of leave to one week and require it to be taken early in the following leave year, however this is not required by law.

    Other Working Time Regulation changes

    The new legislation simplifies the record keeping requirements. Employers are required to keep ‘adequate’ records but not necessarily a full record of all daily working hours.

    The new legislation also incorporates the concept of ‘normal remuneration’ into holiday pay and includes (among other things) commission and regular overtime payments. If you don’t currently include such payments in your calculation of holiday pay, you will need to review your practices.

    Finally, the legislation repeals the special carry-over rules introduced during covid.

    Changes in April 2024

    In April, further changes to the rules on holiday accrual for irregular hours and part-year workers and the payment of rolled up holiday pay are due to come into force. We will cover these changes in another update.

    If you would like help updating your policies or contracts to take account of these changes or any further advice on them, please contact one of the employment team.

    Further guidance and support

    Employment law changes frequently, our team of employment experts can reduce the burden of compliance and support you in protecting your business and supporting your employees.

    For more in-depth guidance or advice during this period of change, book a free 30-minute consultation with our Employment team today.

    This content is correct at time of publication

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