Au Revoir or Encore – Employment reforms post Brexit?

Since the UK's exit from the EU, there has been widespread speculation surrounding the areas of EU retained employment law that may be scrapped and/or reformed.  

Some clues were provided earlier this year, when the government launched a consultation identifying key areas of employment law which they felt could benefit from reform. See our earlier briefing on these proposals here. 

The government has now responded to this consultation, and has also taken the opportunity to respond to its earlier consultation about calculating annual leave entitlement for part-year and irregular hours workers. In its response the government has confirmed that it will:

• streamline the TUPE consultation requirements for small transfers;
• retain the two separate holiday entitlements;
• introduce rolled-up holiday pay for irregular hours and part-year workers;
• simplify record keeping requirements under the Working Time Regulations 1998 ("WTRs"); and
• retain certain EU-derived discrimination protections.

The government has also published draft Statutory Instruments bringing these changes into effect. The Statutory Instruments are expected to come into force on 1 January 2024. 

What changes are proposed to TUPE?  

The government will proceed with its plans to permit businesses in certain extended circumstances to consult directly with employees to comply with consultation requirements under the Transfer of Undertakings (Protection of Employment) Regulations ("TUPE"). 

These reforms will allow businesses with fewer than 50 employees to consult directly with employees when making a transfer of any size (if there are no existing employee representatives). Equivalent provisions will apply for businesses of any size making transfers of fewer than ten employees. 

Facilitating elections for new worker representatives can be onerous, so this is welcome news for employers. However, the significance of this change shouldn't be exaggerated – the government is not proposing radical change to the overall TUPE framework and the change will have limited effect because of the number of employees involved.   

Do the changes impact the calculation of holiday entitlement and pay for regular hours and full-year workers? 

The short answer is (for now) no. The government has scrapped the idea of creating one single holiday entitlement. Instead, it has confirmed that it will retain the distinction between basic and additional leave and that these will continue to be paid at different rates (e.g. 4 weeks at normal rate of pay, and 1.6 weeks at basic rate of pay). 

The draft Statutory Instrument doesn't use the term "normal pay" but does confirm that performance-based commission payments, regular overtime payments and other payments which have been paid regularly to a worker should be included when determining the amount of a week's pay for the purposes of the WTRs. While there is an argument this aligns with the current, generally accepted position based on European case law, there are still questions which the government haven't cleared up (and which will likely be litigated on). In the meantime, if you are an employer who never changed your practices to align with European case law on normal pay this may be the time to review your practices.  

What about calculation of holiday entitlement and pay for irregular hours and part-year workers? 

'Rolled-up' pay refers to workers receiving an increase in their basic pay to reflect their holiday, as opposed to being paid for their holiday when they take it. The government has committed to re-introduce the option for employers to pay 'rolled-up' holiday pay for irregular hours and part-year workers only. The draft Statutory Instrument would allow "rolled-up" holiday pay to be paid by way of a 12.07% uplift to the worker's remuneration for work done. 

Employers will need to consider if they want to introduce 'rolled-up' holiday pay for irregular hours and part-year workers. While changing current processes may be time consuming, in the long run it could simplify arrangements and remove existing administrative burdens.

The government is also reversing the decision taken in Harper v Brazel (see our initial briefing on this decision here). In doing so, it has announced it will legislate to introduce an accrual method to calculate holiday entitlement for irregular hours workers and part-year workers at a rate of 12.07% of hours worked in a pay period. 

Many employers who have term time workers will welcome the reversal of Harper v Brazel (a case which received widespread criticism). However, employers who have already adjusted their processes to comply with this decision will need to review their processes once again. 

What are the proposed changes to record keeping requirements?  

A 2019 EU case (known as the CCOO decision) held that employers needed to record their workers' daily working hours to comply with record keeping requirements. The government has announced it will pass legislation to clarify that UK employers do not have to keep a record of their workers' daily working hours, and instead just need to keep "adequate" records in accordance with the WTRs. 

Employers no longer need to change their record keeping practices to comply with the CCOO decision, and if they have done so already, they may reverse any changes once the legislation comes into effect. 

What is happening to EU derived discrimination protections ? 

Certain interpretative effects of EU law will cease to apply to UK law after the end of 2023. In what looks like an attempt to preserve the status quo, the government has released draft regulations which specifically reproduce certain aspects of EU law into domestic law relating to discrimination (and which would have otherwise fallen away).  These include:

• the retention of the "single source" test used when making a comparison between employees for the purpose of an equal pay claim;
• the right to claim indirect discrimination on the basis of an association with a protected characteristic; 
• a more expansive definition of disability which refers to a person's ability to participate in working life on an equal basis with other workers; 
• the retention of a suite of maternity-related protections including specifying that less favourable treatment because of breastfeeding will constitute direct discrimination; and 
• that liability for employers for direct discrimination will continue in relation to discriminatory statements made outside of an active recruitment process.

These measures are in line with the government's commitment to retain existing worker protections. 

Anything else? 

Finally, the requirement for employers to allow the carry-over of leave in cases where holiday can't be taken due to sickness or family-leave related absence will be reaffirmed in domestic law and the exception that was introduced to allow carry over due to Covid-19 will end.

Further information

For more information on any of the issues raised in this briefing, please speak to your usual Ashurst contact or to any of the people whose contact details are given below.