On 10 May 2023, the Department for Business and Trade published the policy paper “Smarter Regulation to Grow the Economy.” In the government’s words, there are “significant quantities of out-of-date, unworkable and unnecessary EU laws still on our statute book.” This policy paper is the first in a series of upcoming regulatory reform announcements with the aim to “improve regulation across the board to reduce burdens, push down the cost of living and drive economic growth.”
The policy paper addresses three key measures that the government affirms will act as a catalyst to achieve this goal. The regulations set to be reformed are:
- Reducing Working Time Regulations (WTR) reporting burdens;
- Simplifying the employment regulations that apply when a business transfers to a new owner (TUPE); and
- Reforming noncompete clauses to boose competition and innovation.
The paper highlights the “disproportionate burdens” that the WTR place on businesses and states that it will be consulting on proposals to improve the following:
- Removing the requirement to record working hours;
- Removing the exercise of calculating holiday pay and introducing “rolled-up holiday pay; and
- Merging normal annual leave and additional annual leave into one pot of statutory annual leave, without reducing the amount of overall statutory leave entitlement.
Working Time Regulations
Under the current WTR, employers must take all reasonable steps to ensure that each worker’s average working time (including overtime) does not exceed 48 hours per week. Employers must also allow workers 5.6 weeks’ paid holiday each year.
As per Regulation 9 of the WTR, employers are required to maintain adequate records to show compliance with the prescribed limits on average working time, night work and provision of health and safety assessments for each worker.
Under the new proposals, there will no longer be a requirement for employers to record working hours.
Holiday
The policy proposals in respect of holiday allowances are as follows:
- Rolled-up holiday pay that had previously been prevented under EU case law will be allowed; and
The two separate holiday allowances: normal annual leave – the four weeks based on EU law ‒ and additional annual leave ‒ the 1.6 weeks leave under UK law ‒ will be merged into one pot of statutory annual leave, without reducing the amount of overall statutory leave entitlement.
Transfer of Undertakings (Protection of Employment) (TUPE)
The government will be consulting on the proposal to simplify the transfer process by removing the requirement for businesses with fewer than 50 people to elect employee representatives and transfers affecting fewer than 10 employees.
This proposed reform will enable employers to consult with employees directly, reduce the administrative burden for businesses and improve engagement with workers.
At present, businesses are not permitted to consult with their employees directly where they do not have employee representatives in place when there are fewer than 50 employees in the business and fewer than 10 transferees.
Noncompete Clauses
In addition to the proposals above, the policy paper sets out plans to limit noncompete restrictive covenants to three months.
A noncompete clause is a form of post-termination restriction that is incorporated into an employee’s contract of employment. The restriction prevents an employee from joining a competitor for a prescribed period of time (normally for a maximum of 12 months).
The reduction in length of the noncompete clause to three months will not inhibit employers’ ability to restrict activities during notice periods or (paid) garden leave. The proposals do not set out any plans in respect of nonsolicitation or non-dealing clauses and these remain unaffected at this time. The proposed reforms also do not intend to affect arrangements regarding confidentiality clauses.
There is no set timeline for when the government intends to legislate this change. It has simply stated that the change will take place “when parliamentary time allows.”
The policy paper can be found at gov.uk.