Employment law changes on the horizon

There has been a few recent announcements relating to employment law reforms, which could be significant for businesses, and is considered below. In particular, the Government has published a draft statutory instrument, The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023, containing amendments to the law on holiday pay, working time and TUPE.

Working Time Regulations 1998 (WTR) and Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)

The Government has published its response to the consultation ‘Retained EU Employment Law’, which proposed the following reforms:

• Consulting on record keeping requirements in relation to holiday;
• Merging the current annual leave entitlements; and
• Introducing rolled-up holiday pay, while ensuring that workers’ rights continue to be protected.
• Consulting on proposals to change the consultation requirements in the TUPE regulations, to simplify the transfer process, while ensuring that workers’ rights continue to be protected.

What are the changes?

The Regulation, which is likely to come into force on 1 January 2024, will include the following changes:

• Simplifying holiday pay calculations by making rolled-up holiday pay (12.07% of pay) lawful for part-year workers and those who work irregular hours;
• Restating various pieces of retained EU caw law, to ensure that this remains part of UK law following Brexit to allow carry over of:
  • The right to carry over annual leave where an employee has been unable to take it due to being on maternity or other family related leave or sick leave;
  • The right to carry over annual leave where the employer has failed to inform the worker of their right to paid annual leave or enable them to take it; and
  • The rate of pay for annual leave accrued under regulation 13 of the WTR.
• Defining ‘normal remuneration’ for the purposes of holiday pay to include commission payments and other payment, such as regular overtime payments.
• Removing the additional working time record keeping requirements.
• For TUPE transfers, allowing small businesses (with fewer than 50 employees) doing TUPE transfers of any size or businesses of any size undertaking a small transfer (of fewer than 10 employees) to consult their employees directly if there are no existing representatives in place.

Why have these changes been implemented?

Due to the various interpretations of complicated case law in relation to how holiday pay is calculated for irregular hours workers and agency workers, the UK Government has deemed it necessary to amend the WTR so that irregular hours and part-year workers’ annual leave entitlement is pro-rated to the hours they work; introduce an accrual method for calculating holiday entitlement for certain workers; repeal the Covid Regulations (which would mean that with effect from 1 January 2024, workers will no longer be able to accrue Covid carry-over leave, i.e. the 4 weeks of regulation 13 leave). The overall aim is to ensure that compliance is easier for businesses whilst ensuring workers’ overall level of entitlement and protection.

Since leaving the European Union, the UK Government has been taking the opportunity to review the record keeping requirements under the WTR. However, having undertaken a consultation and the responses received, it has since clarified that businesses do not have to keep a record of the daily working hours of their workers if they are able to demonstrate compliance without doing so.

Similarly, in respect of the TUPE consultation reforms, the Government is seeking to add flexibility to businesses whilst retaining important protection for employees.

What do these changes mean for businesses?

Overall, the Government has sought to reduce the administrative burdens of some processes relating to WTR and TUPE, whilst ensuring that workers’ rights are protected. Calculating irregular workers’ and agency workers’ holiday pay has been the subject of debate for some time, particularly with complicated case law resulting in various interpretations from the Courts. It is therefore a welcomed change for businesses to understand how this is calculated to ensure that these workers receive their correct holiday pay.

The Health and Safety Executive is currently working on updating guidance for the record keeping requirements of the WTR and will publish this in line with the commencement of this legislation. The statutory guidance will also set out what employers and workers must do to comply with the law. We will look out for such guidance and see how these reforms are implemented and where these reforms might be affected by a potential change in government.

If you require further advice on this topic, please do not hesitate to contact our employment lawyers.