The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 – what does this mean for your holiday entitlement and pay, and record-keeping?
The Government has published a draft statutory instrument, The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (The Regulations), which will make a number of changes to current UK Employment law as well as re-instating certain EU-derived rules.
The Regulations, which are due to come into force on 1 January 2024, include changes to:
• annual leave and holiday pay calculations under the Working Time Regulations 1998 (WTR)
• record-keeping requirements under the WTRs
• requirements for consultation under the Transfer of Undertakings (Protections of Employment) Regulations 2006 (TUPE)
• end holiday carry over rules introduced during COVID-19 pandemic.
Annual leave and holiday pay calculations
Under the WTR, workers’ annual holiday entitlement of 5.6 weeks is split into:
• 4 weeks’ leave, which implements the right to annual leave under the European Union Working Time Directive (“EU leave”)
• an additional 1.6 weeks, based solely on the WTR (“additional leave”).
The distinction is significant because case law has made clear that workers are entitled to their normal pay for their 4 weeks’ EU leave entitlement, which includes overtime pay, commission and allowances. However, the 1.6 weeks of additional leave, in most circumstances, is limited to basic pay only.
The Government initially considered amalgamating these two leave entitlements to remove the difference in pay rates, however it has decided not to do so, meaning the difference in pay rates will remain. Calculation of EU leave pay is now codified in the WTR.
Key changes to holiday rights for atypical workers
The Regulations make key changes to holiday rights for workers with irregular hours or who only work part of the year. These changes will apply for holiday years beginning on or after 1 April 2024. The changes include:
• A new method of holiday accrual for workers with irregular hours or who only work part of the year. Employers will be permitted to calculate holiday entitlement for irregular hours and part year workers as 12.07% of the hours worked in any pay period. This does not impact how holiday entitlement should be calculated for regular hours workers.
• The Regulations permit employers to choose to pay rolled up holiday pay for irregular hours workers and part year workers. This means that they will be allowed to pay a “holiday pay enhancement” on top of the worker’s wages. Rolled up holiday pay will need to be calculated using the worker’s total earnings over the relevant pay period. Workers will not be able to insist an employer provides the rolled-up payment, the decision will rest with the employer. Importantly, rolled-up holiday pay does not apply to regular hours workers.
• The Regulations set out a different method for calculating holiday entitlement for irregular hours workers and part year workers who are on long term sick leave or family leave, including the use of a 52-week holiday reference period. However, the Government will not introduce an overarching 52-week holiday entitlement reference period for all employee and workers.
Record keeping
The Regulations remove the current requirement for employers to maintain records of working hours and rest records for all employees, even if they work regular hours as long as employers can demonstrate compliance with the WTR in some other way. This proposal intends to remove the requirement on businesses to keep very detailed records that are often an administrative burden.
TUPE
Currently, employers are required to inform and consult with employee representatives where there is a TUPE transfer, save in respect of micro businesses with fewer than 10 staff overall. The Regulations will allow businesses with fewer than 50 employees and businesses of any size undertaking a small transfer (of fewer than 10 employees) to consult directly with their employees if there are no existing worker representatives in place. Where employee representatives, including trade unions, are in place, employers will be required to consult them.
Revoking legislation from COVID-19 pandemic
The Regulations revoke laws that were introduced during the pandemic that permitted roll over of holiday pay for two years in certain circumstances and introduce a backstop date of 31 March 2024 for carry over of leave under these Covid provisions.
Comment
Daniel Gorry, Director in our Employment Law team comments:
“The Regulations have brought changes that are likely to have a significant impact on those employers who utilise irregular hours workers, and those in sectors which engage seasonal or part year workers.
“Hopefully, the changes are welcome simplification of what is usually a complex area for both employers and workers, and a step in the correct direction for making the process smoother.
“In the immediate term, it will be important to take stock in the coming months and determine what, if any, changes need to be made. With that in mind, employers should review whether their current contracts, practices, and procedures reflect the changes brought on by the Regulations, particularly the new 12.07% accrual rules, and the rolled-up holiday pay option.”
