WFM UK: UK Government Responds to Holiday Pay and EU Retained Law Consultations from Earlier this Year (2023) – Fourth & HotSchedules Customer Success Portal

Overview

Back in May 2023, the Department for Business and Trade published the Regulatory Reform Update, Smarter Regulation to Grow the Economy which set out its intention to reduce regulations that unnecessarily burden businesses. It felt that this was particularly important following the exit from the EU which left a legacy of out-of-date, unworkable and unnecessary EU laws still in place for the UK. The Retained EU Law (Revocation and Reform) Act, 2023, provides the power to remove and replace unsuitable retained EU laws.

As part of the update, the government released a consultation to get opinions on three areas that they thought could benefit from reform:

Today, (Wednesday 8th November 2023), the Department for Business and Trade responded to the consultation, and at the same time, responded to a different consultation published in January 2023, where they were seeking opinions on annual leave entitlement for irregular hour and part-year workers, following the Supreme Court's ruling of the Harper Trust vs Brazel case where the 12.07% entitlement calculation was ruled as unlawful.

Draft Legislation was published by the Department of Business and Trade on 9th November which indicates that it will become law as of 1st January 2024 and will apply to Holiday Leave Years commencing 1st April 2024. The legislation is still draft and could change at any time.

The Response

Simplifying Annual Leave and Holiday Pay Calculations

There were several components to both consultations for holiday entitlement and pay calculations that have been addressed in the response.

Holiday annual leave entitlement for irregular hour and part-year workers

The original proposals were to introduce a new 52-week holiday entitlement reference period based on the time spent working over the past 52-week period. This 52-week period is not necessarily the same 52 weeks' worth of data specified in the current calculations (52 worked weeks in a 104-week period), but it may use the most recent 52 weeks and include the weeks where zero hours have been worked.

The Government have responded by confirming that they will not be going ahead with the proposal to introduce a new 52-week reference period. Instead, they will legislate to introduce an accrual method to calculate entitlement based on 12.07% of hours worked within a pay period.

This will come as welcome news to a large number of employers, specifically those in the hospitality or retail sectors who rely on a large seasonal worker pool to cover shifts during particularly busy periods, such as Christmas or the summer holidays.

Customers are advised to seek advice from legal representatives before making changes to employees' holiday calculations in light of the information published in this response.

Combine Holiday Entitlement Regulations to Make it 5.6 Weeks

Currently, Working Time regulations split holiday entitlement into two pays (Regulations 13 and 13A) which total 5.6 weeks. The proposal was to combine the two values (4 weeks of 'normal pay' and 1.6 weeks of 'basic pay') to make a clear 5.6 weeks at 'normal pay'.

The Government's response is that the opinions given during the consultation make it clear that having the two values is not causing much confusion or administrative burden for businesses and so no changes will be made. Employees' entitlement will remain at 5.6 weeks, split as 4 weeks' normal pay, and another 1.6 weeks at basic pay.

They have, however, announced they will make the legislation clearer as to what should make up 'normal pay' in terms of commission payments, overtime and other pay enhancements.

Rolled-Up Holiday Entitlement

The proposal, to make holiday entitlement calculations simpler for employers when they have irregular or part-year workers, was to introduce the concept of 'Rolled-Up' holiday entitlement. This will mean that employees will receive their holiday pay with every payslip, rather than accruing and taking holiday leave.

The Government has confirmed that they will legislate to introduce rolled-up holiday entitlement as an option for irregular or part-year workers. Despite concerns that this may disincentivise these employees from taking time off, it would significantly reduce the administrative burden of calculating holiday pay for these types of workers.

Repeal COVID-19 Carry-Over Legislation

During the pandemic, the Government introduced temporary legislation to allow employees to 'carry over' a proportion of their holiday entitlement if they could not take it due to Covid restrictions. The proposal in the consultation was to find out whether there would be any unintended consequences of removing this legislation.

The response is clear, that the Government intend to continue with the repeal of the carry-over holiday legislation. From 1st January 2024, employees can no longer carry over holiday. The Government recognises that employees may have previously carried over leave to use, so they will be able to take any such leave by 31st March 2024.

Consultation Requirements Under Transfer of Undertakings (Protection of Employment), or TUPE, Regulations

The proposal was to make changes to the consultation portion of the TUPE process. It is understood that portions of the consultation process are a burden to both the transferer and the transferee. These changes would include extending the ability to consult employees directly for a transfer of under 50 employees, where an employee representative is not already in place.

The Government's response is that they will go ahead with the proposals to allow small businesses (with fewer than 50 employees) undertaking a transfer (of any size) as well as a business of any size (undertaking a transfer of 10 or fewer employees) to consult directly with employees where an employee representative is not already in place.

Record-Keeping Requirements Under the Working Time Regulations

The proposal was to remove the requirement to record daily working hours, in an effort to reduce the administrative burden and cost surrounding recording working hours to the standard set out by the 2019 judgment of the Court of Justice of the European Union (Federación de Servicios de Comisiones Obreras (CCOO) v Deutsche Bank SAE).

The Government has confirmed that the opinions received show there is clear evidence of a level of misunderstanding around record-keeping requirements. Therefore it will remove the effects of the COOO judgement. Employers will still need to keep adequate records to demonstrate compliance with the Working Time Regulations.

Helpful Information

The following links may be helpful to find out more information about the above changes

The materials available on this website are for general informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any issue or problem particular to your situation. Use of and access to this site or any of the e-mail links contained within the site do not create an attorney-client relationship between Fourth and you or any other user or browser. The opinions expressed at or through this site are the opinions of the individual presenter based on the information provided on governmental websites and should not be acted upon without first seeking specific guidance from your attorney. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. All liability with respect to actions taken or not taken based on the contents of this site are hereby expressly disclaimed.