On 8 November 2023 the UK government published its response to its May 2023 consultation paper on “Retained EU Employment Law” (the Response). This covered three areas: (i) record keeping requirements under the Working Time Regulations (WTR 1998); (ii) simplifying annual leave and holiday pay calculations in the WTR 1998; and (iii) consultation requirements under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). The Response also incorporates the recommendations of the earlier consultation about calculating annual leave entitlement for part-year and irregular hours workers following the Supreme Court’s decision in Harpur Trust v Brazel. The Response confirms that the government will proceed with the majority of the proposals in the consultation paper. On the same day the government published the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (the Regulations) which will implement the changes proposed. The Regulations will come into force on 1 January 2024.
Proposals to amend WTR 1998
Record keeping under the WTR 1998: The government proposes to remove the effects of the CJEU judgment (Federación de Servicios de Comisiones Obreras (CCOO) v Deutsche Bank SAE) (the CCOO 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, which are stricter requirements than those currently required under Regulation 9 of the WTR 1998. The government states that the proposal intends to remove the risk of increased requirements on businesses to keep records that were disproportionate to the cost, administrative burden and the effect on workers. Accordingly, the Regulations propose an amendment to Regulation 9 of the WTR 1998 to make it clear that the employer must keep records which are adequate to show whether the employer has complied with the limits relating to maximum weekly working time, maximum working time for young workers, night work and health assessment and transfer of night workers to day work. In addition, an employer need not record the worker’s daily working hours if they are able to demonstrate compliance without doing so. The new Regulation 9 also makes it clear that the manner and format in which such records are to be created, maintained and kept is at the reasonable discretion of the employer
The government will not at this time be introducing a single annual leave entitlement: Under the WTR 1998 there are two “pots” of annual leave – the 4 weeks under Regulation 13 and 1.6 weeks under Regulation 13A. Although there was a suggestion that these two “pots” could be merged, the government is not currently proposing to do so. The government’s view is that the responses to the consultation indicated that making this change would only be beneficial if there were also a single rate of holiday pay. However, the government wants to maintain the two distinct ‘pots’ of annual leave and the two existing rates of holiday pay so that workers continue to receive 4 weeks at the “normal” rate of pay and 1.6 weeks at the basic rate of pay (although interestingly from the responses, 280 (49% of) employers and 510 (57% of) “workers” indicated that they currently pay or receive 5.6 weeks of statutory annual leave at normal pay so their employer does not differentiate). The WTR 1998 currently does not cover what is considered “normal” pay and it is not entirely settled in the body of European case law. However, the Regulations include provisions which clarify the two rates of holiday pay (see below).
The government will introduce rolled up holiday pay for irregular hours workers and part-year workers, which would include some agency workers. Rolled up holiday pay is where a worker receives an enhancement of their pay with every regular payment to cover holiday pay as opposed to receiving holiday pay only when they take annual leave. There were mixed responses to this. Some expressed concern that this would not be suitable for typical workers with regular hours and that this could lead to missed leave or reduced pay, yet the government believes that this will be useful for those who are on irregular hours. Further, 56% of respondents to the consultation were concerned that that their existing payroll system may not be able to calculate the holiday pay using the rolled-up holiday pay calculation as well as the 52-week reference period. The Regulations introduce new Regulation 15B to be inserted into the WTR 1998 which applies to irregular hours workers and part years workers to allow rolled up holiday pay to be paid. Such a worker cannot, in any leave year, accrue more than 28 days of statutory annual leave. The proposal is therefore that this will only apply to those on irregular hours and part-year workers (which may include some agency workers) and not those on regular hours.
The government will legislate to introduce an accrual method to calculate entitlement at 12.07% of hours worked in a pay period for irregular hour workers and part-year workers. This method was the method widely used by employers before the Harpur Trust v Brazel judgment. The Regulations insert new Regulation 16A into the WTR 1998 which sets out how to determine holiday pay for irregular workers and part year workers by paying a 12.07% uplift to the workers remuneration for the work done.
The Regulations also make the following other changes to the WTR 1998:
- Inserts a provision to allow for a worker to carry over leave into the following leave year where they have not been able to take a period of Regulation 13 leave and also Regulation 13A leave in that leave year due to taking a period of statutory leave (i.e. maternity, parental leave etc.)
- Insert a provision to say that, where a worker has taken sick leave, the worker may carry over any remaining Regulation 13 leave (but not Regulation 13A leave) into the next holiday year, provided that it is taken by the end of 18 months from the end of the leave year in which the entitlement arose.
- Entitles a worker to carry forward any Regulation 13 leave in circumstances where the employer fails to recognise a worker’s right to annual leave, has failed to pay for leave which is taken, fails to give the worker an opportunity to take the leave, fails to encourage them to do so, or fails to tell the worker that any leave not taken will be lost. Such leave must be taken in the leave year following the year in which the leave or payment was not taken or made.
- Amends Regulation 16 regarding payments in respect of leave to set out that, in determining a week’s pay for Regulation 13 and Regulations 15B (irregular workers) only, the amount of a week’s pay includes:Payments including commission payments, which are intrinsically linked to the performance of tasks which a worker is obliged to carry out under the terms of their contract;Payments for professional or personal status relating to length of service, seniority or professional qualifications; and Other payments, such as overtime payments, which have been regularly paid to a worker in the 52 weeks preceding the calculation date. This amended Regulation 16 restates the rights determined by case law which would potentially cease to apply once the interpretive effects of EU law fall away after 31 December 2023. However, although many employers may well have amended their holiday pay to take account of commission or regular overtime it is arguable that these provisions extend further than the case law (for example, performance related bonuses or other allowances which may well be captured). As indicated above Regulation 13A leave is paid at the rate of basic salary.
Amendments to TUPE
The government will proceed with the planned reforms to the TUPE consultation requirements which apply when a TUPE transfer takes place. It will allow 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) to consult with their employees directly where there are no existing worker representatives in place. This will be achieved by amending Regulation 13A of TUPE.
The Equality Act 2010 (Amendment) Regulations 2023 (EqAct Regulations)
On 8 November 2023 the government also published the draft EqAct Regulations. These regulations amend the Equality Act 2010 to preserve some of the discrimination protections derived from EU law that would otherwise have fallen away under the Retained EU Law (Revocation and Reform) Act 2023. These include protections with regard to the ‘single source’ test for establishing whether there is a comparison for equal pay purposes, the right to claim indirect discrimination by association, and a definition of “disability” that takes into account a person’s ability to participate in working life on an equal basis with other workers.