Changes to employment law on holidays and staff representatives consultation announced

1st May 2023 The UK Government has announced a number of changes to employment law.

This month the Government has announced that it proposes to make a number of changes to employment law which address areas of law that had been introduced through the European Union.

The areas that have been identified include two specific areas that have often been causes of confusion for small and medium sized businesses, being rules relating to holidays and holiday pay, and those relating to transfers of businesses.

Transfers of business, and the rules that apply to staff affected by the transfer, known as TUPE, include various consultation requirements. Many employers find these requirements confusing- which involve the use of staff representatives. The small or medium sized businesses that contact us about transfers are often unsure of the consultation obligations, and frequently are trying to work to a tight timetable for the completion of the business transfer which make the consultation obligations very difficult to fulfil. It will therefore come as a relief to many small businesses that the Government is now proposing to remove the requirement to consult with appointed staff representatives when there are fewer than 50 employees in the business and fewer than ten transferees. Many of the smallest businesses have been exempted already, as consultation with staff representatives is not required where a business has fewer than ten employees. Therefore, the impact of the proposed change will have an impact on a business that has between 10 and 49 employees (a very large number of businesses come within this group), of whom 9 or fewer are transferring. It is in those cases where the changes will remove the obligation to have consultation with staff representatives. It should be noted that this will not remove the obligation to provide information about the proposed transfer to the affected staff. Employers should not assume that there will be no information or consultation obligations on them at all, as they should still give the information to the staff about the proposed transfer.

Nevertheless, the proposed change will ease some of the burden on those small businesses that would have to go through a process of finding appropriate staff representatives to consult with about a proposed transfer.

For very many employees their annual holiday is the highlight of their year. The Working Time Regulations govern the statutory obligations that provide for paid holiday. For staff that worked irregular hours, or for fixed term contracts, many employers used to use a system of “rolled-up” pay within their weekly or monthly pay. Under the case law on paid holiday rights, this approach, ie using “rolled-up” holiday pay was technically unlawful, as the cases indicated that the worker should receive the holiday pay when the holiday is actually taken. The Government is now proposing to change the law to allow employers to use “rolled-up” holiday pay.

The proposed basis of calculation for rolled-up holiday pay is that it should be paid as 12.07% of a worker’s pay in each payslip. This may be altered if the worker is entitled to extra contractual holiday above the statutory minimum entitlement. The “rolled-up” holiday pay will also have to be clearly marked on the payslip. It is of course essential that employers appreciate that they cannot simply impose this system and basis of payment on their workers if they are currently calculating their holiday pay, and paying it under a different arrangement.  

In addition, the Government is also proposing to remove the requirement for record-keeping for working hours, as is currently obliged. Obviously, there are a number of valid reasons for any employer to keep records of staff working hours.

One other area of the current rules on calculating holiday pay that causes confusion is determining when the employer should take account of overtime and commission payments in calculating a worker’s holiday pay. The Government is proposing to merge the “normal” holiday leave (ie the minimum under the old basic EU Law of 4 weeks per year), and the “additional” holiday leave which was added by later legislation (which was aimed at effectively adding in an additional amount of annual holiday entitlement by adding further days to reflect the number of statutory Bank Holidays in each year, which amounts to 1.6 weeks per year). By merging the “normal” and the “additional” annual holiday entitlement proposed rules may avoid the complications in the pay calculation by omitting commissions and overtime from the calculation of holiday pay. Any simplification of the calculation will make life easier for both HR and payroll departments. The changes will be particularly likely to be attractive to employers of casual staff and temporary staff.   

The Government is also considering changing the rules on holiday entitlement for workers in the first year of their employment, so that they will accrue holiday at the end of each pay period (be that monthly or weekly- depending on the frequency of payment) until the end of the first year of their employment. New regulations will set out how the holiday entitlement will be paid.  

If you need any further advice on any matter raised in this article do not hesitate to contact us at Hallett Employment Law Services Ltd.