Background

At present, the statutory minimum holiday entitlement under the Working Time Regulations 1998 entitles all full time workers to 20 days of paid holiday. This includes the 8 bank holidays. Part time workers are entitled to a pro-rata entitlement. In order to ensure that workers take their holiday entitlement, the regulations provide that no payment may be made in lieu of the 20 days holiday entitlement (except on termination of employment), and it may not be carried over from one year to the next.

New legislation

The new legislation will mean that all workers will have a minimum of 28 days of paid holiday including the bank holidays. The changes will be introduced in 2 stages in order to give employers time to adjust to the change. On 1 October 2007 the entitlement will increase to 24 days, and 1 April 2009 it will increase to 28 days. Until 1 April 2009 employers will be permitted to make payment in lieu of the 4 additional days of holiday as a transitional measure. As from 1 April 2009 no payment in lieu of the 28 day statutory holiday entitlement will be permitted except upon the termination of employment. Workers will be entitled to carry over up to 8 days' holiday to the following year only.

Effect on employers

The change may have a real financial effect on many employers, particularly in sectors which rely heavily on agency workers and other seasonal and hourly paid workers, who are commonly only given the statutory minimum paid holiday entitlement. In these cases, the entitlement will increase by 40%, resulting in a higher cost to employers. Even employers who currently offer more than 28 days of paid holiday to their workers will have to make adjustments to comply with the new regulations governing the administration of holiday. There will be less freedom to allow employees to carry holiday over from one year to another and to make payments in lieu of holiday.