On 12 May 2023, the government published a consultation paper on Retained EU Employment Law. This paper confirms the plans for UK employment law post-Brexit, and outlines potential changes in relation to working time record keeping, “rolled-up” holiday pay, statutory holiday entitlement, calculating holiday pay, annual leave accrual and TUPE consultation requirements.
Working time record keeping requirement
The government plans to change current legislation so that employers do not have to keep a record of the daily working hours of their employees. Currently, employers are required to do this for the purpose of complying with the Working Time Regulations and ensuring that workers who have not opted-out do not exceed an average of 48 hours per week.
The European Court of Justice’s decision in CCOO v Deutsche Bank affirmed this rule and required employers to accurately record hours worked every day by each worker, including overtime, rest breaks and rest periods.
The rationale behind removing this requirement is that it imposes a disproportionate burden and cost on the employer.
Rolled up holiday pay could be back
The term “rolled-up” holiday refers to a practice whereby employers include an employee’s holiday pay within their basic pay. Rolled up holiday is typically paid at 12.07% on top of the hourly rate of pay, which represents a worker’s statutory entitlement to 5.6 weeks of annual leave as a proportion of a 46.4 week working year.
Historically, it was common for employers to use this system to pay holiday pay to those working atypical hours. However, back in 2006, the European Court of Justice ruled that a “rolled-up” holiday pay system was incompatible with the Working Time Directive, as it undermined the purpose of holiday by discouraging workers from taking time off work. Despite this, many organisations have continued to use this mechanism, particularly when engaging casual workers.
Now, in 2023, the government’s consultation states that rolled-up holiday is being proposed again as an option for all workers, including those who have regular hours. The consultation suggests that using this method has benefits to both workers and employers, though these benefits have not been specified.
Holiday entitlement to be merged and calculating holiday pay to be simplified
Currently, UK employees have two separate holiday entitlements – 4 weeks derived from EU law and an additional 1.6 weeks provided by UK statute. The government reforms intend to merge these two entitlements into one entitlement of 5.6 weeks.
On the face of it, this change may not seem like much of a change at all. However, because the 4 weeks of EU holiday entitlement has previously been subject to different, EU-established rules, this reform will impact other holiday issues.
- Different rates of holiday pay. In the current holiday framework, the 1.6 additional weeks derived from domestic law can be paid in accordance with an individual’s basic rate of pay, whereas the 4 weeks must be paid based on “normal remuneration”, which includes additional payments such as regular overtime and guaranteed commission. The consultation paper states that “normal remuneration” is difficult to define in legislation, and requests the views of employers and workers on how the new single rate of holiday pay should be calculated.
- Carrying over holiday entitlement. Under the proposals, the rules on carrying over holiday should stay the same, so that in normal circumstances workers will still be permitted to carry over 1.6 weeks into the following year if there is a written agreement with their employer, and it will not normally be permissible for workers to carry over the entire statutory annual leave entitlement.
However, in the case of long-term sick leave for example, the consultation paper suggests that the whole statutory holiday entitlement could be carried over automatically. This would be a more generous rule than the current law relating to holidays and sick leave, as individuals are only currently permitted to carry over the 4 weeks of EU leave, which must then be used within 18 months from the date the leave is carried over.
Holiday accrual in the first year of employment to be changed
The consultation proposes a system to rectify the confusion between the two current provisions relating to holiday accrual in the first year of employment: one that limits the amount of holiday a new worker can take in their first year, and one that determines the calculation for any accrued but untaken holiday pay should the employment be terminated during a holiday year.
Under the new plans, workers in their first year of employment will build up holiday entitlement at the end of each pay period.
TUPE Consultation requirement to be limited
It is currently a requirement to elect employee representatives for consultation on a TUPE transfer, except for businesses with fewer than 10 employees. The government have confirmed that the requirement to elect employee representatives will be removed in two scenarios:
- Where the business has fewer than 50 employees, irrespective of the size of the transfer.
- Where the proposed transfer involves fewer than 10 employees, irrespective of the size of the business.
More generally, the paper calls for suggestions on how the current TUPE regulations could be improved, indicating that further developments to UK TUPE rules may be on the horizon.
The consultation paper states that, except for the proposed reforms set out above, all other key areas employment law will remain unchanged for the time being, including protections for part-time and fixed-term workers, as well as family friendly rights.
If you would like more information on the proposed changes above, or are seeking advice on how these reforms may impact your business, feel free to get in touch with the team.
Jones Chase is a specialist employment law firm based in the centre of London with an excellent track record of looking after those that we assist.
Do contact us should you require further information or need any assistance. We are always happy to speak to people and point them in the right direction.