Following consultations earlier in the year, the Government has now published draft legislation setting out important changes to the law on holiday pay and entitlement, working time records and TUPE consultations. The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 are expected to take effect from 1 January 2024 and will: allow employers to “roll up” holiday pay for irregular workers and part-year workers (which greatly simplifies the holiday pay calculation); remove the current requirement for employers to keep records of daily working hours for the majority of staff; and allow small businesses and/or businesses undertaking small transfers to consult directly with employees regarding a TUPE transfer (instead of electing and consulting with employee representatives).
The key changes can be summarised in more detail as follows:
Holiday Pay and Entitlement
- It will be lawful for employers to pay “rolled up” holiday pay to irregular workers and part-year workers. This practice has been unlawful since 2006, but can be implemented again for holiday years starting on or after 1 April 2024. This can be done by applying a 12.07% uplift to a worker’s normal pay, instead of paying holiday pay when they actually take holiday. The figure of 12.07% represents a worker’s statutory minimum holiday entitlement of 5.6 weeks as a proportion of the working year of 46.4 weeks. This change does not affect how holiday pay should be calculated and paid for workers with regular hours.
- Similarly, for holiday years starting on or after 1 April 2024, the holiday entitlement for irregular workers and part-year workers can be calculated as 12.07% of the hours worked over the relevant pay period. This helps ease the complications arising from the Supreme Court’s decision in Harpur Trust v Brazel last year (which stated that holiday entitlement for permanent part-year workers should not be capped at 12.07% of their annual hours, even though this meant they would have a greater holiday entitlement than part-time workers working the same number of total hours across the year).
- Commission payments, as well as other payments which have been regularly paid in the previous 52 weeks (such as overtime payments), must be included in at least four weeks’ worth of annual holiday pay.
- Parts of EU case law relating to the carry-over of holiday entitlement will be restated, confirming that they remain a part of UK law following Brexit. This includes the carry-over of: holiday to the following year when a worker is unable to take it due to being on family related leave (such as maternity or paternity leave); four weeks of holiday for up to 18 months where a worker is unable to take it due to sickness absence; and four weeks of holiday where the worker has either not been given an opportunity to take it or the employer has failed to tell them that any untaken holiday which cannot be carried over will be lost.
- Employers will no longer be subject to a requirement to keep records of each worker’s daily working hours (even if they work regular hours) as set out under previous European case law, as long as they can show that they have complied with the Working Time Regulations through other proportionate means (e.g. evidence of particular working patterns).
- For TUPE transfers taking place on or after 1 July 2024, employers will be able to consult directly with employees (instead of having to elect and consult with employee representatives) where the employer is a small business with less than 50 employees and/or it is a small transfer with less than 10 employees transferring under TUPE. Previously, this exception only applied to employers with less than 10 employees; however, it is now much more practical and applies where businesses of any size are carrying out a small TUPE transfer.
Hannah Ball comments:
These changes are a breath of fresh air, and most of them will be widely welcomed by employers (who will find it much easier to ensure compliance with their legal obligations in respect of holiday pay, working time and TUPE consultation). In particular, the introduction of rolled up holiday pay will be a huge relief, since calculating the holiday pay of irregular workers has proved complex in the past, often placing a disproportionate administrative burden on employers. The ability for businesses of any size to directly consult with employees where there is a small TUPE transfer also adopts a common-sense approach which avoids the need to elect employee representatives, and will help simplify and speed up the TUPE consultation process.
If you have any questions about the upcoming changes under the new Regulations, please contact a member of the team here.
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