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The Countdown to Compliance: West Midlands Agencies and the Holiday Pay Reform Challenge


Small and mid-size recruitment agencies businesses across the West Midlands are unprepared for the changes affecting how they calculate holiday pay for their irregular and part-year workers under the Holiday Pay Reforms that are now in force (1 April 2024) and form part of the new Employee Rights Regulations.

This is according to compliance and payroll experts at Birmingham-based employment solutions specialists HIVE360, which has been working with recruiters as well as private companies to help them navigate and understand the Regulations since they came into force on 1st January this year.

The company estimates that whilst awareness of the new Regulations is pretty widespread, around half of recruiters and businesses don’t know the Holiday Pay Reform forms part of the wider Regulations.

Indeed, a survey conducted last week (25 March 2024) by HIVE360 to establish the level of awareness and views of the new Regulations, found that more than half (55%) of businesses taking part are unaware of the Employee Rights Regulations.

“Whilst the larger recruitment agencies have already made changes to systems and software and in many cases, trained staff about the new regulations, the small and mid-sized recruitment businesses are lagging far behind, and worryingly have been simply ambling along towards the 1 April deadline, not realising the implications the Holiday Pay Reforms now have on their contracts and annual leave year periods.

“Anecdotally, most clients are aware of the changes but not necessarily the detail of them,” he adds. “For instance, there’s been a lot of exposure on the rolled up holiday pay but little on the changes regarding calculating accruals over family based leave. Most of those our team has spoken to about the new regulations are not looking to change to rolled up holiday pay for several reasons; the biggest one being that it creates more work to try and ensure workers do still take leave, as most won’t if they know they aren’t ‘being paid’ for it, so they’re choosing to stick with the more traditional method of accrual and holiday pay.”#

The UK Government introduced the changes to the Working Time Regulations effective from 1 January 2024, with the aim of the new legislation – the Employee Rights Regulations – simplifying holiday pay calculation and accrual for ‘irregular hours workers’ and ‘part-year workers’, as well as to provide clear guidance around which workers fall into these categories.

“Their objective is to create more straightforward rules for employers managing irregular and part-year workers by removing confusion and preventing over and under payments in comparison to full time or fixed hour workers,” says McCormack. “For most employers, and workers, the new regulations are a welcome change and long overdue, bringing clarity and transparency to an area of employment law that was shrouded in grey thanks to the Harpur Trust case of 2022. For others it may seem like an administrative nightmare, but what cannot be disputed is that change was needed and has now finally been delivered.”

One of the biggest shake ups means that ‘rolled-up’ holiday pay for these workers will now be allowed and recognised – a 12.07% uplift to regular pay in each pay period. “For irregular hours and part year workers, holiday will accrue at 12.07% of hours worked each pay period, capped at 28 days. Holiday pay will be based on average weekly earnings, ignoring unpaid weeks,” adds McCormack.

“The Gangmasters and Labour Abuse Authority, or GLAA, is a Non Departmental Public Body that exists to protect vulnerable and exploited workers such as human trafficking, forced labour and illegal labour provision, as well as offences under the National Minimum Wage and Employment Agencies Acts. It appears that GLAA has also not addressed how it will monitor, police and assess compliance with the new Regulations, especially Holiday Pay Reform, nor have they provided training to their own offices on how to assess compliance on the ground by GLAA businesses and license holders.

“The GLAA has been vehemently against the new Regulations, particularly Holiday Pay Reform, and it will be interesting to see their approach now the new rules are in place, and whether they actually accept them.”

For additional Government information on the Reforms, see: Holiday pay and entitlement reforms from 1 January 2024 – GOV.UK (www.gov.uk) and HIVE360’s guidance: Holiday Pay Reform 2024: Get Ahead of the Curve | HIVE360. To help calculate the amount of entitlement available, use the calculator on the Government website.

HIVE360 is an employment solution expert, that is focused on adding value to its client’s businesses and looking after their people and workers. As a specialist, expert outsourced employment services and administration partner, HIVE360 provides effective outsourced employment administration and PAYE HMRC-compliant payroll, and employee engagement and employee benefits solutions. The company works with owner-managed, privately owned and medium-sized (150-plus employees/workers) businesses, as well as recruitment businesses and agencies, their workforce and candidates. By tackling the challenge to attract, engage and retain the best talent, HIVE360 strives to help its clients become employers and recruiters of choice by giving them a strong employment offering in the market.

More information: https://www.hive360.com/payroll-pension-perks/

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