In a busy week for the government, we have seen the publication of two new draft amending regulations introduced to restate and retain rights established in EU derived legislation that may otherwise have disappeared on 1 January 2024 due to Brexit. These are the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 and the Equality Act 2010 (Amendment) Regulations 2023, both published on 8 November 2023.
The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023
Following consultations to consider aspects of the Working Time Regulations post-Brexit and calculation of holiday entitlement for part-year and irregular hours workers following the case of Harpur Trust v Brazel, the government has now published the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023.
The draft regulations are due to come into effect on 1 January 2024 and consider three areas of reform:
- Record-keeping requirements under the Working Time Regulations 1998 (WTR)
- Simplifying annual leave and holiday pay calculations under the WTR
- Consultation requirements under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)
In summary, the regulations include the following proposed amendments.
No Single Annual Leave Entitlement
For now, the proposal to create one statutory leave entitlement governed by one set of rules has been dropped and the four weeks’ basic annual leave mandated by EU law and the 1.6 weeks’ additional leave under the WTR will remain as two distinct “pots” of annual leave. Workers will continue to receive four weeks at the normal rate of pay (“normal” remuneration to include additional payments such as commission and overtime, as discussed below) and 1.6 weeks at the basic rate of pay.
Record Keeping
Employers will no longer have to keep a record of workers’ daily working hours and rest records provided they are able to demonstrate their compliance with the WTR without doing so. The draft regulations state that records may be “created, maintained and kept in such manner and format as the employer reasonably thinks fit.”
Accrual of Holiday Pay for Irregular and Part-Year Workers
The consultation made clear there was a requirement for a more simplified approach for irregular and part-year workers.
For leave years staring from 1 April 2024, holiday entitlement for irregular and part-year workers will be calculated at 12.07% of hours worked over the preceding pay period and will apply in the first year of employment and beyond. This was a method widely used prior to the Supreme Court’s decision in Harpur Trust v Brazel and will be welcomed by many employers.
There will be no amendment to accrual for other workers, who will continue to accrue annual leave in their first year of employment as they do now by receiving one-twelfth of the statutory entitlement on the first day of each month and to pro-rate it thereafter.
A 52-week reference period will be used to calculate entitlement accrued by irregular hours and part-year workers during maternity/family-related/sick leave.
Rolled-Up Holiday Pay
Employers with holiday years from 1 April 2024 will be lawfully able to roll up holiday pay for irregular hours or part-year workers provided:
- The rate of rolled-up holiday pay is calculated at 12.07% of a worker’s total earnings in a pay period;
- Is paid at the same time as their ordinary pay; and
- The amount of holiday pay is clearly itemised separately on their pay slips.
Calculation of Normal Pay
The confirmation that the four weeks’ basic annual leave mandated by EU law and the 1.6 weeks’ additional leave prescribed by the WTR will remain as two distinct “pots” will be of relevance when calculating “normal remuneration” for the purposes of holiday pay for the four weeks annual leave set out under Regulation 13 of annual leave. The new regulations define “normal remuneration” for these four weeks to include the following:
- Payments, including commission payments, which are intrinsically linked to the performance of tasks which the worker is contractually obliged to carry out;
- Payments for professional or personal status relating to length of service, seniority or professional qualifications; and
- Other payments, such as overtime, which have been regularly paid to the worker in the last 52 weeks.
Carryover of Annual Leave
- Workers can carry over all statutory annual leave (5.6 weeks) if they have been unable to take it due to being on family-related leave.
- Workers can carry over up to four weeks’ statutory leave for a maximum of 18 months where they are unable to take their leave due to sickness.
- Workers can carry over up to four weeks’ statutory leave where the employer:
- Fails to accept the worker has a right to statutory paid annual leave;
- Has failed to encourage or provide the worker with a reasonable opportunity to take annual leave; or
- Has failed to inform the worker that any leave not taken and which cannot be carried forward will be lost.
The regulations also propose to revoke the Working Time (Coronavirus) (Amendment) Regulations 2020 which allowed for annual leave to be carried over where the worker was unable to take annual leave owing to Covid. Any annual leave which has been carried over as a result of COVID-19 must now be taken by 31 March 2024.
TUPE Consultations
In addition to the above proposed amendments to the WTR, the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 also contains amendments to consultation requirements under TUPE for transfers taking place on or after 1 July 2024.
The proposed amendments will allow businesses with fewer than 50 employees to consult directly with employees when carrying out a TUPE transfer of any size, if there are no existing employee representatives in place.
Where a business of any size is carrying out a small TUPE transfer of fewer than 10 employees, they will be able to inform and consult directly with the affected employees if there are no existing worker representatives in place.
It is hoped that the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 will provide some welcome clarity to employers addressing the complexity of calculating holiday pay. In anticipation of the new regulations coming into effect on 1 January 2024, employers are now encouraged to:
- Review their holiday policies to check their current terms regarding the carryover of holiday pay; and
- Consider how they will address holiday pay for their part-year workers or those that work irregular hours.
The Equality Act 2010 (Amendment) Regulations 2023
The second set of amendment regulations to be published by the government on 8 November 2023 is the Equality Act 2010 (Amendment) Regulations 2023.
The proposed purpose of these draft regulations, which are also due to come into effect on 1 January 2024, is to ensure “that the law will continue to offer the same protection after the end of 2023 in relation to pregnancy, maternity and breastfeeding, indirect discrimination, access to employment and occupation, equal pay and the definition of disability.”
In summary, the key points of the proposed amendments take from the memorandum to the regulations are as follows:
- Less favourable treatment on grounds of breastfeeding constitutes direct discrimination on grounds of sex;
- Women are protected from unfavourable treatment after they return from maternity leave where that treatment is in connection with the pregnancy or a pregnancy-related illness occurring before their return;
- Women are protected against pregnancy and maternity discrimination in the workplace where they have an entitlement to maternity leave which is equivalent to compulsory, ordinary or additional maternity leave under the Maternity and Parental Leave etc. Regulations 1999;
- The right to claim indirect discrimination on the grounds of association with a protected characteristic, such that a claimant without a relevant protected characteristic, who suffers a disadvantage arising from a discriminatory provision, criterion or practice together with persons with the protected characteristic may bring a claim of indirect discrimination;
- Employers may be liable for direct discrimination if a discriminatory statement is made regarding recruitment, even when there is no identifiable victim and no active recruitment process underway;
- The “single source” comparator test for equal pay claims will be preserved, so an employee will be able to draw a comparison with another employee where their terms are attributable to a single body responsible for setting or continuing the pay inequality and which can restore equal treatment, or where their terms are governed by the same collective agreement; and
- The definition of disability must be understood as specifically covering a person’s ability to participate in their working life on an equal basis with other workers.
Whilst the Equality and Human Rights Commission has stated they welcome the proposed regulations “enshrining these vital protections from EU law into our domestic legislation” they have also advised that they will be monitoring the impact of the regulations as they become law and “consider any issues that may arise”.
As we draw closer to the end of 2023, we will continue to update you as to any further draft amendment regulations arising from the sunset of retained EU legislation.