We have had a welcome injection of interest in Employment law, with draft regulations being laid before Parliament on changes to the Equality Act, welcome action on holiday pay, which may be the biggest shakeup of the Working Time Regulations since they were introduced some 25 years ago and also consideration of the TUPE regs.
Retained Law
The Government has published its response to the consultation ‘Retained EU Employment Law’, which proposed reforms to the calculation of annual leave and holiday pay, record-keeping requirements under the Working Time Regulations 1998 (WTR), and to the consultation requirements under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
The draft regulations before Parliament, The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 are intended to come into force on 1 January 2024. We set out the key responses below:
Holiday Pay
The draft regulations address the perceived unfairness of the Supreme Court’s decision in Harpur Trust v Brazel, which found that all workers are entitled to 5.6 of weeks paid leave a year regardless of whether they are part-year or irregular workers. See our summary of this case here.
These new regulations will introduce, an accrual method to calculate holiday entitlement. The entitlement will be calculated at 12.07% of hours worked in a pay period for irregular hour workers and part-year workers in the first year of employment and beyond. This method was widely used before the Harpur Trust judgment and better reflects holiday leave parity.
In addition, pay for such annual leave may be paid by way of rolled-up holiday pay. (“rolled-up” holiday pay refers to the practice of paying an employee one rate of pay which incorporates holiday pay) This enables workers to receive an additional amount or enhancement to their regular pay instead of being paid when they take annual leave, but only for irregular hours and part-year workers (which may include some agency workers). The new regulations would allow rolled-up holiday pay for holiday years from 1 April 2024, as long as:
- the worker counts as an irregular hours or part-year worker;
- holiday pay is calculated at 12.07% of all pay for work done;
- the extra 12.07% is paid at the same time as pay for the work done; and
- the holiday pay is itemised separately on the payslip.
Update
There will be two new classes of “workers” for the purposes of calculating holiday pay, Irregular Hours Workers and Part Year Workers. In essence, Irregular Hours Workers are those on the whole have no clear pattern of working hours from each pay period to the next. Part Year Workers, at its most basic, are those have at least one week a year where they are not working and not paid. For these two categories employers will be able to consider rolled up holiday pay instead.
The Government has published new guidance on Holiday Pay in light of the changes that came into effect on 1 January 2024. The Guidance can be found here. Remember these changes affect leave years that start on or after 1 April 2024, which is not far away. Employers who consider that they engage Part Year Workers or Irregular Hour Works and wish to consider Rolled Up Holiday Pay for them, should already be or imminently start considering these changes now and engage with relevant workers and unions (where recognised) to make sure everything is in place for the commencement of new leave years.
Record-keeping requirements under the WTRs
The Government has also confirmed it will go ahead with the proposed changes to record-keeping requirements under the WTR. This will mean that employers do not have to record the daily working hours of their workers. This removes uncertainty regarding the legal position in the UK following the ECJ’s ruling in CCOO v Deutsche Bank. The Government is no longer bound by ECJ decisions and will therefore amend the WTR to clarify this position. The overall aim of the Government here is to ensure that businesses are not faced with administrative burdens which are disproportionate to costs.
The new regulations will mean that employers still need to keep adequate records (albeit less onerous) to demonstrate compliance with the WTRs as is currently prescribed in legislation. These include:
- The weekly working limit of 48 hours
- Opt-out agreements
- Length of night work
- Health assessments for night workers
TUPE
Similarly, TUPE also derives from EU law which means that the UK Government is now able to amend it. Following the consultation, the Government will make minor amendments to TUPE to simplify the consultation obligations for businesses with less than 50 employees to enable them to consul directly with their employees in the absence of worker representatives/ trade union recognition.
Commentary
It is important for employers who employ workers under irregular hours or for only part of the year to pay particular attention to the changes in holiday pay and amend their policies and potentially revise terms and conditions to reflect these changes. However, the simplified accrual method and removal of the prohibition on paying rolled-up holiday pay for such workers should hopefully make the process a lot smoother.
We expect that the changes will be positively received by employers. They offer a heightened level of certainty for employers engaging workers with irregular hours or term time only employees. This marks a positive step forward in ensuring compliance and transparency for employers in navigating the nuances of varied work arrangements.
However, it is worth noting that the reforms are due to come into force from 1 January 2024 and so there is little time for businesses to adapt, particularly if they want to re-introduce rolled up holiday pay quickly.
Furthermore, the Government’s response promises that “more fundamental” reforms to the rate of holiday pay are being contemplated, so employers will need to continue to monitor developments in this area for some time to come.
If any employer wishes to discuss these Regulations or any urgent action that they wish to take on holiday pay or other matters in this article, please reach out to anyone in Employment Team who will be happy to assist.
This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any of the issues raised in this article, please contact us today by telephone or email enquiries@sharpepritchard.co.uk.
