The introduction of additional annual leave

This article examines the impact of the Working Time (Amendment) Regulations 2007, which phase in an entitlement to an additional 1.6 weeks' statutory annual leave from 1 October 2007.

On this page:
Introduction
The amendment Regulations
Employers that already provide 5.6 weeks' leave
Additional annual leave under reg. 13A
Limit on leave entitlement
Payment in lieu
Carrying additional leave forward
Rounding up

Introduction

Public holidays in the UK have never been a matter for statutory employment law. Individual workers do not have any statutory right to time off in relation to public holidays - although a contractual entitlement to such leave, or time off in lieu, is common. The Working Time Regulations 1998 (SI 1998/1833) introduced a right to paid holiday - currently four weeks a year - for all workers, but made no mention of public holidays. Employers have, therefore, been able to include any paid time off granted in respect of public holidays in the four-week entitlement. Where an employer follows this practice, after eight public holidays have been accounted for, an employee who works a five-day week has only 12 days of annual leave remaining.

The amendment Regulations

The Labour party manifesto for the 2005 general election pledged an increase in the minimum level of holiday entitlement so that all workers would be entitled to four weeks' paid leave in addition to public holidays. This goes beyond what is required by the Working Time Directive, so s.13 of the Work and Families Act 2006 authorised the secretary of state to introduce Regulations increasing annual holiday entitlement.

The Working Time (Amendment) Regulations 2007 (SI 2007/2079) have now been published and come into force on 1 October 2007. They cover Great Britain only, although equivalent provisions are being introduced in Northern Ireland by the Working Time (Amendment) Regulations (Northern Ireland) 2007 (SR 2007/340).

The amendment Regulations do not give workers a right to paid time off in respect of public holidays per se. Rather, they introduce a right to an additional 1.6 weeks' annual leave - eight days for a worker who works a five-day week.

This increase will be implemented in two stages, with an additional 0.8 week's entitlement coming on stream on 1 October 2007 and the remaining 0.8 week's entitlement on 1 April 2009. The Regulations insert a new reg. 13A into the Working Time Regulations 1998 providing for this additional leave and making rather complicated provision for the phased introduction of the increase.

Employers that already provide 5.6 weeks' leave

Employers can avoid the complexity of the transition by simply having in place by 1 October 2007 a contractual right for all their workers to receive at least 5.6 weeks' paid annual leave. New reg. 26A provides that reg. 13A will not apply if, as at 1 October 2007, there is a "relevant agreement" in place that provides each worker employed by the employer with the lesser of 1.6 weeks' or eight days' leave in addition to the minimum four-week entitlement under reg. 13. A relevant agreement is defined in reg. 2 as a workforce agreement, a collective agreement or "any other agreement in writing which is legally enforceable as between the worker and his employer". Accordingly, an employer that, as at 1 October 2007, already provides for at least 5.6 weeks' leave, inclusive of public holidays, for all its employees, and has clearly set out this entitlement in either a collective agreement or individual contracts of employment, will be unaffected by the amendment Regulations, provided that certain minimum conditions are met.

The minimum conditions are that the "additional" leave is paid at the rate of a full week's pay in respect of each week of leave, and cannot be replaced by a payment in lieu, except where the employment comes to an end. It is also a requirement that the additional leave cannot be carried forward for more than one year.

If, therefore, a contract of employment provides that an individual is entitled to four weeks' holiday plus eight public holidays, all paid at his or her normal rate of pay, that right replaces the right contained in reg. 13A. If, however, the contract allows the employee to sell back any unused holiday to the employer at the end of the holiday year, this will not satisfy reg. 26A and the rights contained in reg. 13A will apply. The employer is free to allow the employee to carry forward any unused holiday that is in addition to the four-week minimum into the next holiday year. Provided that the additional amount cannot be further carried forward into the holiday year that follows that one, reg. 26A will apply and the employer need not worry aboutreg. 13A.

If the contractual entitlement to holiday exceeds 5.6 weeks, in respect of the entitlement for this additional period, the employer is free to provide for the employee to sell back unused leave or to carry the leave over for as many years as the parties wish. For example, where a contract provides for five weeks' holiday, plus eight bank holidays, this will equate to 33 days' holiday for a worker who works a standard five-day week - exceeding the new leave entitlement by five days. The employer could, therefore, allow the employee to sell back up to five days of unused leave, or carry it over for more than one year, and still comply with reg. 26A.

An employer that is unwilling or unable to provide the full 1.6 weeks' additional leave for each of its workers by 1 October 2007 will be covered by reg. 13A.

Additional annual leave under reg. 13A

Workers will be entitled to the initial 0.8 week's additional leave from 1 October 2007. How much additional leave they will receive from this date will depend on when their leave year begins and how much is left to run after 1 October 2007. The start of the leave year is generally set by an individual's contract of employment or contained in a collective agreement. In the absence of an agreed date, reg. 13 provides that the leave year begins on the date that the worker's employment begins and on each subsequent anniversary of that date or, where the employment began before the Working Time Regulations 1998 came into force in October 1998, on 1 October of each year.

Regulation 13A(2)(a) provides that, for any leave year beginning on or after 1 October 2007, but before 1 April 2008, the additional annual leave entitlement will be 0.8 weeks. This represents the first phase of the introduction of an eventual entitlement to 1.6 weeks' additional leave.

For any leave year that begins before 1 October 2007, the additional leave entitlement will be a proportion of the 0.8 week's leave equivalent to the proportion of the year beginning on 1 October 2007 that would have elapsed at the end of that leave year (reg. 13A(2)(b)). This rather obscure formulation is best understood by example.

For many workers the leave year runs from 1 January to 31 December. For a leave year beginning on 1 January 2007, working out the amount of additional annual leave to which a worker is entitled from 1 October 2007 requires consideration of what proportion of the year beginning on 1 October 2007 will have expired by 31 December 2007 - the end of the leave year. October to December represents a quarter of a year. The amount of additional leave applicable in this case will accordingly be a quarter of 0.8 weeks, ie 0.2 weeks. For such workers the statutory minimum leave entitlement for 2007 will therefore be 4.2 weeks.

For a leave year beginning on 1 April 2008, the additional leave will be 0.8 weeks (reg. 13A(2)(c)). Where the leave year begins after 1 April 2008, but before 1 April 2009, the additional leave will be 0.8 weeks plus a proportion of a further 0.8 week's leave equivalent to the proportion of the year beginning on 1 April 2009 that will have elapsed at the end of that leave year.

Taking again the example of someone whose leave year begins on 1 January each year, we saw previously that for the year beginning 1 January 2007 the additional leave entitlement will be 0.2 weeks. For the year beginning 1 January 2008, the additional leave entitlement will be 0.8 weeks. For the year beginning 1 January 2009, the proportion of the year beginning 1 April 2009 that will have expired by 31 December 2009 will be three-quarters, ie nine months. The additional leave entitlement will, therefore, be 0.8 weeks plus a further 0.6 weeks, making a total of 1.4 weeks' additional leave.

In any leave year beginning on or after 1 April 2009, the additional leave entitlement will be 1.6 weeks.

A holiday entitlement ready reckoner on the DBERR website enables employers to calculate workers' leave entitlement depending on when their leave year begins.

Regulation 13A(5) provides that, where a worker begins employment part way through the leave year, the amount of additional leave to which he or she is entitled in what remains of the leave year is pro rated according to the proportion of the leave year that remains when the employment begins.

An interactive calculator on the Business Link website can be used to calculate the leave entitlement of workers whose employment started part way through the leave year.

Limit on leave entitlement

The Working Time Regulations 1998 express leave entitlement in terms of weeks rather than days. The number of days' leave to which a worker is entitled will depend on the number of days that he or she works in a week. Where a worker works a regular five-day week, the additional 1.6 weeks' leave equates to eight days - a period equivalent to the number of public holidays traditionally observed in England and Wales. For workers who work a normal six-day week, the additional 1.6 weeks' leave would equate to 9.6 days. However, reg. 13A(3) caps the aggregate entitlement to annual leave and additional leave at 28 days. Therefore, for a worker on a six-day week, for whom four weeks' leave equates to 24 days, the additional leave entitlement will be only four days.

Payment in lieu

Regulation 13A(6) provides that the additional leave cannot be replaced by a payment in lieu except where the employment is terminated. However, as a transitional provision, a payment in lieu of the initial 0.8 week'sleave is allowed for leave years that begin on or before 1 April 2008. A payment in lieu is also permitted for the proportion of the second additional 0.8 week's leave applicable where the holiday year begins after 1 April 2008 but before 1 April 2009. No payment in lieu is allowed for any additional leave where the holiday year begins on or after 1 April 2009.

Carrying additional leave forward

Under reg. 13, the four-week holiday entitlement may not be carried forward into the following leave year. This is not the position with the additional leave under reg. 13A. Regulation 13A(7) allows for a "relevant agreement" to provide for any of the additional leave to be carried forward into the leave year immediately following the year in which it is due. It will therefore be open to employers to provide for the carry-over of the additional leave in the contracts of employment of new employees - or to seek an amendment to existing employees' contracts to provide for the additional holiday to be carried over.

Rounding up

Regulation 13(6) of the Working Time Regulations 1998 provides that, where a worker's employment begins on a date that is later than the start of his or her first leave year, and the period of leave to which the worker is entitled is, or includes, a proportion of a week, the proportion must be determined in days and any fraction of a day treated as a whole day. However, reg. 13(6) is repealed by the amendment Regulations from 1 October 2007.