Holiday Pay and TUPE: New Draft legislation Published by the Government
The post-Brexit era has brought significant changes to UK employment law. Now, with the government publishing their response to their Retained EU Law consultation, a new wave of changes is coming.
The latest changes are to holiday pay regulations and the Transfer of Undertakings (Protection of Employment) or ‘TUPE’. Draft legislation has been published and it is expected that these changes will come into effect in January 2024.
Key Changes in Working Regulations
Most of the changes are aimed at simplifying the retained EU legislation with UK-specific provisions. In theory, this should make it easier for UK businesses to innovate and grow. The key changes are:
Reduction in Reporting Requirements
This change is no doubt a welcome relief for many businesses. The government has streamlined the reporting obligations under employment law, by removing the need for employers to record exactly how many hours each employee was working.
From next year, employers will only be expected to keep a record that proves compliance with: The weekly working limit of 48 hours; Opt-out agreements; Length of night work; and health assessments for night workers.
The reduced administrative load means companies can allocate more resources to growth rather than box-ticking compliance.
Simplification of Annual Leave and Holiday Pay Calculations
Calculating holiday pay has long been a source of confusion and disputes. Particularly in light of the Supreme Court ruling (Harpur Trust v Brazel) which meant that part-time and temporary workers were entitled to more holiday pay than full-time workers.
The new legislation will calculate holiday pay via an accrual method. Entitlement for part-time and temporary workers will be calculated at 12.07 per cent of the hours worked in a pay period. By streamlining these calculations under the Working Time Regulations, the change aims to reduce confusion and disputes regarding holiday pay.
Streamlining of TUPE Regulations
Particularly beneficial for small business transfers, this change allows for direct consultation with employees if there is no pre-existing employee representation. It aims to simplify the transfer process, reducing the bureaucratic hurdles that often accompany such transitions.
Missed Opportunities in THE Reform
Reactions to the upcoming changes have generally been met with positivity. Dave Chaplin, CEO of ContractorCalculator, says:
“These reforms are most welcome and will provide much-needed clarity and fairness around holiday pay for contractors, especially those working through umbrella companies. Let’s hope we will now have a fairer and transparent system for all and that e see less holiday pay skimming by unscrupulous operators in the market.”
This sentiment was echoed by Neil Carberry of the Recruitment & Employment Confederation. He said he “strongly supported” the changes in legislation:
“Making sure employers can easily comply with the law and workers get their holiday pay is important – and these changes deliver that,”
However, many commentators were disappointed that some other areas of the current legislation weren’t addressed. These include:
Regulation 13 Letters: The proposal to omit agency worker information from Regulation 13 letters is based on its frequent oversight, which can lead to technical breaches. Simplifying these requirements could prevent inadvertent non-compliance.
Aligning Penalties for Collective Consultation Failures: The inconsistency in penalties between TUPE and redundancies is a notable oversight. Aligning these penalties could simplify the legal framework for employers, making it easier to remember and apply the correct standards.
Clarifying the ETO Reason in Redundancies: The current stipulation that an outgoing employer cannot rely on an incoming employer’s Economic, Technical, or Organisational (ETO) reason for redundancies complicates the process. This often leads to artificial delays in making redundancies, affecting both employers and employees.
Settling Claims – COT3 vs. Settlement Agreements: The current disparity in settling claims under TUPE poses challenges. A streamlined approach would aid employers in resolving disputes more effectively and consistently.
Restricting TUPE to Employees Excluding 'Workers': The extension of TUPE protections to 'type-b' workers has broadened the scope of TUPE, potentially beyond its intended purpose. Revisiting this definition could provide more clarity and focus the protection on traditional employee relationships, aligning more closely with the original intent of TUPE.
Whilst these haven’t been addressed yet, UK legislation is in a state of flux. With the right lobbying from industry leaders, more positive change can be achieved for businesses.
These reforms have streamlined processes and show that the government can listen. As they weigh additional reforms, staying up to date is essential to keep your business compliant.
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