The government has published a draft statutory instrument, the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (Draft Regulations), which contains amendments to the law on holiday pay, TUPE and recording working time.
The key changes include:
- clarifying the record-keeping requirements under the Working Time Regulations 1998 (WTR);
- introducing rolled-up holiday pay for irregular and part-year workers;
- retaining the entitlement to carry-over annual leave in certain circumstances; and
- defining “normal pay” for the purposes of calculating holiday pay.
Why reform now?
The Retained EU Law (Revocation and Reform) Act 2023 provides powers to amend, remove and replace retained EU law. The original intention of that Act was to revoke all retained EU law automatically at the end of 2023 unless it was expressly transferred into UK law. The Government reversed this position in May 2023 and announced that only those laws expressly identified by the Government would be revoked. In response to this, the Department of Business & Trade launched the consultation, “Retained Employment Law”, on 12 May 2023 identifying the areas of EU-derived employment law which it believed could benefit from reform. Its response to the consultation was published on 8 November 2023 and sets out the reasoning for the changes proposed in the Draft Regulations.
The Draft Regulations were laid before Parliament on 7 November 2023 and, subject to approval by a resolution of each House of Parliament, are intended to come into force on 1 January 2024.
Record keeping under the WTR
Under the WTR, employers are required to keep records to show compliance with the maximum 48-hour working week. Following the European Courts of Justice decision in CCOO v Deutsche Bank, there has been concern that the WTR goes so far as to require employers to record working and rest time for each worker each day.
The Draft Regulations amend the record-keeping requirements and make it clear that employers do not need to keep a record of workers’ daily working hours.
Holiday pay and entitlement for part-year and irregular workers
Following the Supreme Court's ruling in Harper Trust v Brazel, whereby it determined unanimously that part-year workers are entitled to 5.6 weeks' holiday in full, without pro-rating, the Government has sought reform on calculating holiday pay and entitlement for part-year and irregular-hour workers.
The Government has decided to introduce an accrual method to calculate holiday entitlement and pay for irregular-hour and part-year workers. Under the Draft Regulations, holiday entitlement will be calculated based on 12.07% of hours worked in a pay period and will be paid at the rate of 12.07% of pay in a pay period. This method of “rolling-up” holiday was widely used before the Harper Trust judgment and essentially reflects the hours that workers have actually worked in their current leave year.
Additional holiday entitlement/pay changes to the WTR
The Draft Regulations restate the right, which currently arises from EU case law (which will otherwise be revoked by the Retained EU (Revocation and Reform) Act 2023) to carry over holiday at the end of a leave year in various different situations including sickness, being on family/statutory-related leave, the failure to recognise employment status and failing to afford the right to paid annual leave.
The Draft Regulations also include a definition of normal pay for the purposes of calculating normal pay under the WTR, which includes overtime and commission.
TUPE consultation
Under TUPE, employers are required to inform and consult appropriate representatives of employees about a relevant transfer. The only exception for this is where a business has fewer than ten employees and no existing appointed representative.
The Government has sought to amend this to give businesses more flexibility to consult directly with employees in certain circumstances. Accordingly, under the Draft Regulations, all small businesses (those with fewer than 50 employees) will be permitted to consult directly with employees if there are no existing employee representatives in place and businesses of any size will be permitted to consult directly with employees (where no existing employee representatives are in place ) where a transfer involves fewer than ten employees.
The government has published a draft statutory instrument, the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (Draft Regulations), which contains amendments to the law on holiday pay, TUPE and recording working time.
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