Navigating the Future: Key Changes in UK Employment Law on Holiday Pay and Leave Entitlements

The landscape of UK employment law is undergoing significant changes, as outlined in recent government proposals and responses to consultations. In this blog post, we will delve into the noteworthy adjustments employers need to be aware of, focusing on the reform of holiday pay and leave entitlements for regular and irregular hours workers.

Rolled-Up Holiday Pay: A Revival

One of the Government’s major proposals is the revival of rolled-up holiday pay, albeit with a twist. Rolled-up holiday pay, a system previously disallowed by EU case law, is set to make a comeback but only for irregular-hours workers, such as those on zero-hour contracts and part-year workers. The proposal allows employers to calculate holiday pay based on total earnings in the pay period, providing an alternative to the existing 52-week holiday pay reference period.

Employers embracing rolled-up holiday pay will need to adjust the payment to 12.07% of a worker’s pay on each payslip, mirroring the proportion of the year dedicated to statutory annual leave. This proposal marks a significant shift in calculating holiday pay, potentially simplifying matters for employers and workers with irregular hours.

Record Keeping: A Shift in Focus

Employers must maintain sufficient records showcasing adherence to various criteria, including the maximum weekly working time, night work duration, and health assessments for night-to-day worker transfers. Nevertheless, a ruling by the European Court of Justice (ECJ) in 2019 mandated employers to go beyond this and document the daily working hours of all employees. This judgment introduced a potential hazard for those not complying and posed a considerable administrative challenge.

The Government has since affirmed its intention to nullify the impact of that judgment and revise the guidance on the Working Time Regulations. The aim is to provide clearer directives on recording obligations for employers.

Part-Year and Irregular Hours Workers: Addressing Specific Concerns

The Government will introduce legislation to permit the utilization of the 12.07% method for calculating holiday accrual specifically tailored for irregular hours workers and individuals engaged in part-year employment. This calculation will be contingent upon the actual number of hours worked within the designated pay period, be it weekly, monthly, or daily. Additionally, agency workers characterized by part-year employment or irregular working hours will also have the option to apply this method in determining their holiday accrual.

TUPE Reforms

The reform of TUPE aims to eliminate the obligation to consult with representatives in small businesses (with fewer than 50 employees) involved in a transfer of any size. Additionally, businesses of any size conducting a small transfer (involving fewer than ten employees) will have the flexibility to directly consult with employees if there are no existing worker representatives.

In response to concerns raised by trade unions and certain employers, who perceived this as weakening existing worker protections, the Government clarified that these reforms do not alter the requirement to consult during a TUPE transfer. If representatives, including trade unions, are already in place, the obligation remains to consult with them.

Addressing worries that these reforms might complicate transfers, the Government reassured employers that these changes would be “permissive” in nature. Businesses will retain the option to choose and consult with representatives if they prefer this approach.

Clarification of “Normal Remuneration”

To clarify “normal remuneration” concerning holiday pay, forthcoming legislation will outline specific inclusions when calculating the normal pay rate. This legislation will encompass payments, including commission payments, intrinsically linked to tasks the worker is contractually obliged to perform. It will also cover payments associated with professional or personal status based on length of service, seniority, or professional qualifications. Additionally, payments like overtime, regularly disbursed to a worker in the 52 weeks preceding the calculation, will be considered in determining normal remuneration.

Sapphire HR: Your Trusted Advisors in HR and Employment Law

As these changes unfold, navigating the intricacies of UK employment law becomes crucial. Sapphire HR stands as a beacon of expertise in HR and employment law, offering comprehensive guidance to businesses navigating the evolving landscape. With a team of seasoned professionals, Sapphire HR ensures that employers stay informed and compliant, making the transition through these reforms smoother.