The Government is proposing to increase the statutory minimum holiday entitlement from 20 to 28 days next year - what are the implications for your business?

Under the Working Time Regulations, introduced in1998, employees are entitled to four weeks paid holiday each year. There is currently no statutory obligation for this to exclude Bank Holidays and so the absolute minimum holiday entitlement a worker can currently receive is 12 days plus 8 Bank Holidays each year.

However the Government is proposing to change this in 2007, so that the minimum entitlement would include Bank Holidays and increase from 4 weeks to 5.6 weeks i.e. 20 to 28 days for a 5 day a week worker.

What is being proposed?
The Government is still consulting but is currently proposing:

• A phased introduction - To give businesses time to adjust and phase in the new entitlement, initially increasing it from 4 weeks to 4.8 weeks (20 to 24 days). When and how the remainder of the increase will be introduced is yet to be decided.

• Buying out and carrying holiday over ? It will be compulsory for 4 weeks leave to be taken as opposed to being paid out or carried over. However the government are considering allowing up to 8 days to either be carried over or bought out. In which case, organisations would be allowed to decide for themselves whether these flexibilities are something they want to contractually allow or prohibit.

• Bank Holiday working ? This will not prohibit bank holiday working. The proposal is to stipulate the minimum number of leave days to be taken across the year but allow employers to determine how the days off are managed. For example if a business is closed on Bank Holidays employees may be obliged to take these days off. However if a business requires employees to work on Bank Holidays, the organisation could fairly select a proportion of employees to work, as long as they are given the statutory minimum days off across the annual leave period and the process is in line with the employment contract.

What do I need to do?
You do not need to make any immediate changes, as the new regulations are not proposed to come into effect until October 2007, however this change will have a major impact on some businesses so it is wise to start thinking about the potential implications and plan the best way to adapt to these changes. Points to consider now include:

• Do you need to increase the holiday entitlement? If your employees are currently entitled to less than 28 days leave per year, including Bank Holidays, you will need to review entitlements.

• The practical, administration and financial implications of increasing holiday entitlement and the benefits and drawbacks of introducing the full entitlement in one go or applying a phased approach.

• What amendments should be made to your contracts. We recommend that all organisations review contracts to ensure they are legally compliant and meet your business needs.

• How and when you should implement the practical and contractual changes you might need to make.

• Whether you need to review the way leave is booked and managed

We will keep you updated on developments but for more information or a discussion in the meantime, please do contact Harriet Lear on 01404 42359 or email harriet@hradvantage.co.uk

The initial Consultation period closes on 22nd September 2006. If you want to participate in the government?s consultation, you can have your say by visiting www.dti.gov.uk