UK: Government announces reforms to working time rules on holiday and TUPE

The Government has this week published its response to recent consultations (see here) on proposed changes to the Working Time Regulations (WTR) and TUPE.  It aims to take advantage of Brexit to remove some administrative complexity for employers while also codifying certain worker rights established through ECJ caselaw (which could otherwise be reversed following 1 January 2024).  Draft amending regulations, intended to come into force on 1 January 2024, have been published here.

Recording working time

The WTR will be amended to clarify that employers do not need to keep a record of each worker's working hours each day, provided they can demonstrate compliance with the WTR without doing so - employers will still need to keep adequate records in the context of a given workplace and working patterns. The draft amending regulations state that employers may create, maintain and keep these records in such manner and format as the employer reasonably thinks fit.  This will reverse a 2019 ruling of the ECJ (largely honoured in the breach) that employers should be required to set up an “objective, reliable and accessible” system for recording the actual number and distribution of hours worked by individual workers each day.

Annual leave

• The Government is dropping its proposal to merge the 4 weeks' EU-derived statutory leave with the domestic entitlement to an additional 1.6 weeks to create a single type of statutory leave governed by one set of rules.  The entitlement to 'normal remuneration' during the 4 weeks' leave, established in EU-derived case law, will be codified to include:
  • payments, including commission, intrinsically linked to the performance of tasks which a worker is contractually obliged to carry out
  • payments for professional or personal status relating to length of service, seniority or professional qualifications, and
  • payments, such as overtime payments, which have been regularly paid to a worker in the 52 weeks preceding the calculation.

The entitlement to 1.6 weeks at the basic rate of pay is unchanged (save in relation to irregular hours and part-year workers - see below).  The Government has said it may consider more fundamental reforms to holiday pay later.

• Two substantive changes will apply only to irregular hours and part-year workers and for leave years starting on or after 1 April 2024. A worker will be an irregular hours worker if the number of contractual paid hours (aggregating hours under all contracts with the same employer) in each pay period in a particular leave year is wholly or mostly variable.  Part-year workers are those who are contractually required to work only part of the leave year and there is at least a week within the year (during the term of the contract) when they are not required to work and are not paid.
  • The Government has proposed changes in response to the Supreme Court decision in Brazel v The Harpur Trust (which held that the current WTR do not allow holiday for part-year workers to be proportionately reduced to reflect non-working weeks).  It has dropped the idea of using a 52 week reference period.  Instead, leave entitlement will be calculated using an accrual rate of 12.07% of hours worked in each pay period rounded to the nearest hour. (There will be no change to accrual for other workers in their first year of employment, which will remain 1/12th of their entitlement on the first day of each month.)  Holiday pay for irregular hours and part-year workers must reflect a worker's total earnings, including the elements of normal remuneration set out above, for the whole statutory entitlement.  A 52 week reference period will be used to calculate entitlement accrued by irregular hours and part-year workers during maternity/family-related/sick leave.
  • The Government will re-introduce the ability to pay 'rolled-up' holiday pay.  (Rolled-up pay was declared unlawful by an ECJ decision in 2006, but remained in use in many sectors.)  Employers will be able to add an additional amount to regular pay to reflect leave entitlement, rather than pay while the worker is on holiday, and must itemise the amount of holiday pay on payslips.  The rate of rolled-up holiday pay is to be 12.07% of a worker's total earnings in a pay period (eg in the week, if paid weekly).
• The Government intends to codify rights established by ECJ caselaw to carry over statutory annual leave into a new leave year (at the moment these have to be 'read into' the WTR by tribunals):
  • Workers unable to take the 4 week or 1.6 week statutory leave entitlements due to maternity/family-related leave will be allowed to take it by the end of the following leave year.
  • Workers unable to take the 4 week leave entitlement due to sick leave will have 18 months from the end of the leave year in which it accrued to take it.  (This applies to the whole of an irregular hours or part-year worker's statutory entitlement for leave years starting on or after 1 April 2024.)
  • Workers can also carry over the 4 week leave entitlement where an employer fails to (i) recognise a worker's right to statutory paid annual leave, (ii) give the worker a reasonable opportunity, and encourage the worker, to take their entitlement, or (iii) inform them that they will lose leave that cannot be carried forward.  In these circumstances carried-over leave must be taken by the end of the first full leave year after such failures have been remedied.  (Again, this applies to the whole of an irregular hours or part-year worker's statutory entitlement for leave years starting on or after 1 April 2024.)
• The draft amending regulations will remove provisions which allowed longer carry-over if a worker was unable to take leave due to the pandemic.  Any remaining carried-over entitlement must be taken by 31 March 2024.

The Government will publish revised guidance on the Working Time Regulations to reflect the changes.  Employers with atypical workers will need to consider whether to introduce or adjust rolled-up holiday pay.  Employers should also check their holiday policies reflect the carry-over rules and include the required elements of pay.

Update 2 January 2024: guidance has now been published, see here. 

TUPE

The Government intends to proceed with its proposals to amend TUPE consultation requirements, for transfers taking place on or after 1 July 2024.  Employers with no appropriate employee representatives in place will be allowed to inform and consult affected employees directly where (i) they employ fewer than 50 employees in total, or (ii) there are, or are likely to be, fewer than 10 transferring employees (whatever size the employer is).

The consultation also asked for other suggested changes. The suggestion to make changes to terms and conditions easier has been rejected by the Government, but it will continue to monitor and consider if action is required in relation to suggestions to clarify the application of TUPE to workers and the impact of the ECJ ruling in Govaerts (allowing contracts of employment to be split and transferred to more than one transferee).

To discuss the implications of these proposals further please do get in touch with your usual HSF contact.