Insights Government proposal to permit rolled up holiday pay – a reprieve for the Film and TV industry?

As part of its recent policy paper Smarter Regulation to Grow the Economy, the Department for Business and Trade has announced a package of proposed employment law reforms designed to cut red tape and reduce costs for businesses. These measures include limiting the length of non-compete clauses to three months and removing retained EU law which requires employers to keep accurate working hour records for their employees and workers. However, in what is likely to be of most significance for our Film and TV clients, the government has also proposed changes to allow rolled up holiday pay. A consultation seeking views on some of these reforms (including rolled up holiday pay) has been launched and is due to close on 7 July 2023.

The practice known as “rolled up” holiday pay means incorporating a worker’s holiday pay into their basic pay throughout the year, instead of paying this when the individual takes holiday. It was deemed unlawful by the ECJ in Robinson-Steele v RD Retail Services [2006] amid concerns that workers would be deterred from taking holiday if they weren’t receiving pay for such leave. However, the Government commissioned Taylor Review that was published in 2017 highlighted the benefit of rolled up holiday pay for some workers, particularly those with casual arrangements or those working in the gig economy. For individuals like this who receive variable pay, holiday pay should technically be calculated on the basis of their average earnings over a 52-week reference period, which can be administratively very onerous and difficult for employers to calculate and budget for.

Rolled up holiday pay therefore offers a simple and streamlined alternative as it can be calculated as an enhancement to basic pay and included with every payslip. In its consultation paper, the government has proposed introducing a rolled up holiday pay rate of 12.07% of a worker’s hourly wage as this reflects the minimum 5.6 weeks of statutory annual leave applied to the working weeks of each year (i.e. 5.6 divided by 46.4). Furthermore, the paper also proposes that this reform should be applicable for all workers and not limited to just those with irregular working hours.

This is clearly a progressive approach that is driven at achieving universal simplicity in this area.  While it will be popular with many, there must surely be scope for considerable challenge from some quarters on the basis that this could result in material reductions in the amounts of holiday pay received by certain workers, which could potentially be hard to justify for categories of workers where calculating holiday pay is relatively straightforward.

What seems clear to us is that the proposed reforms could provide significant benefits for the Film & TV industry. Calculating holiday pay across productions is vastly complicated for various reasons, not least given the multitude of roles and different ways that people work. In an industry already facing budget pressures and workforce challenges, some added simplicity would almost certainly be welcomed with open arms.

Permitting rolled up holiday pay would allow productions to budget their staffing costs in advance and would also address the difficulties that have been caused by the recent Supreme Court case of Harpur Trust v Brazel [2022], which has led to concerns that part-year workers may receive disproportionately high amounts of holiday pay due to the current statutory framework (a decision that has already led to its own Government consultation). We suspect such reform would also prove popular with production workers as well, as they would receive their holiday pay regularly and upfront as opposed to having to wait for this to be paid out at the end of their engagement.

Although there will rightfully be some debate to be had regarding the proposals, reform in this area is clearly needed. From the perspective of our Film and TV clients, the proposals certainly provide hope for a less complicated statutory framework in this area.