Latest employment law changes that may affect your business from 1st January 2024.
The government, through the Department for Business and Trade, published a paper on 8 November 2023 responding to the consultations on retained EU employment law and calculating holiday pay, the latter in particular for part-year and irregular hour workers. The paper can be found here – Retained EU Employment Law consultation response (publishing.service.gov.uk)
The paper runs to 49 pages, so I have summarised it below by answering key questions concerning its contents.
Why did the consultations, and this response, happen?
The government believe that three areas of retained EU employment law require reform, namely:
- Record keeping requirements under the Working Time Regulations (WTR);
- Simplifying annual leave and holiday pay calculations in the Working Time Regulations; and
- Consultation requirements under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE).
In addition, the Supreme Court’s decision in the Harpur Trust v Brazel case resulted in part-year workers being entitled, in certain situations, to a greater annual leave entitlement than part-time workers who work the same number of hours across the year. The government are looking to, in effect, reverse the Brazel case and, as a result, simplify how holiday is calculated for part-year and irregular hour workers.
What is the government’s proposal for record keeping requirements under the WTR?
A 2019 EU case, Federación de Servicios de Comisiones Obreras (CCOO) v Deutsche Bank SAE judgment (“the CCOO judgment”) held that objective, reliable and accessible records need to be kept in relation to the right to minimum daily rest breaks, weekly rest periods, and the limit on the maximum weekly working time. The government felt that this was a risk for employers, who would need to comply with increased record keeping requirements by recording the duration of time worked each day by each worker, rather than simply needing to ensure ‘adequate’ proportionate records.
The government are proposing to remove the effects of the CCOO judgment. Employers will still need to keep adequate records to demonstrate compliance with the WTR. The government has said that the CCOO judgment does not give workers any new substantive rights and therefore, they will not lose any rights with the introduction of the removal of the effects of that case.
What is the proposal concerning the calculation of holiday pay?
The government are not going to change the current split of 4 weeks’ holiday at the normal rate of pay and 1.6 weeks’ holiday at the basic rate of pay. Many employers do not distinguish between the two types anyway, paying the normal rate of pay for holiday for the whole 5.6 weeks’ entitlement (or more if the employment contract provides it).
Rolled-up holiday pay, which was made unlawful under EU law, will be allowed again for part-year and irregular hour workers. This is where a worker receives an enhancement (at least 12.07% of pay) with every payslip to cover their holiday pay, as opposed to receiving holiday pay only when they take their annual leave.
Legislation will be made to introduce an accrual method to calculate entitlement at 12.07% of hours worked in a pay period for part-year and irregular hour workers in the first year of employment and beyond. Other workers will continue to accrue annual leave in their first year of employment as they do now by receiving 1/12th of the statutory entitlement on the first day of each month and to pro-rate it thereafter.
Other parts of holiday pay legislation that many thought might be changed, such as the right to carry over holiday when sick or including commission and overtime when calculating what should be included in holiday pay, are to remain.
What is the TUPE proposal?
Small businesses, with fewer than 50 employees, undertaking a transfer of any size, and businesses of any size undertaking a small transfer of fewer than 10 employees will be allowed to consult their employees directly if there are no existing worker representatives in place. At the moment collective consultation with representatives has to take place in these situations.
When will these proposals come into effect?
The legislation implementing these proposals comes into force on 1st January 2024. However, the holiday pay changes will only come into effect for annual leave years starting on 1st April 2024 or afterwards. Therefore, the current rules will still be in effect for some workers right up until 31st March 2025.
How have the proposals been received?
They have largely been welcomed, particularly by employer organisations. Trade Unions have raised some concerns about them, particularly the rolled-up holiday and TUPE consultation changes. As is often the case, the devil will be in the detail, and we will have to see how the changes play out once they come into effect. It is almost certainly the case that there will be issues to iron out and potentially more legislation changes for working time and holiday pay.
Author: Paul Burton, Employment Law Solicitor, View HR
Email: paul@viewhr.co.uk
Paul has been an employment solicitor for nearly 20 years and is known for his in-depth knowledge and expertise in the areas of employment law and human resources. He was a partner at a sizeable South Coast law firm before coming to ViewHR and has often been asked to be a guest speaker at HR events, including lectures for CIPD. He regularly provides training to clients in relation to their human resources, for example, performance management and tackling sickness absence.
Paul is a member of the Employment Lawyers Association and has been recognised for many years in the Legal 500, a leading independent legal directory. He specialises in both contentious and non-contentious employment law matters, including unfair dismissal, whistleblowing, disability discrimination, TUPE, settlement agreements, contracts and policies.
