The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 – what does this mean for your record keeping and holiday entitlement and pay?
The Government has just published a draft statutory instrument, the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (“the Regulations”), which will come into effect on 1 January 2024. The Regulations address topics in three main areas which derive from EU legislation or related case law, which would have been lost, due to Brexit legislation, had this step not been taken:
- Record-keeping requirements under the Working Time Regulations 1998 (“WTRs”)
- Holidays and holiday pay calculations in the WTRs
- Requirements for consultation under the Transfer of Undertakings (Protections of Employment) Regulations 2006 (“TUPE”) – this is essentially to change the requirements around collective consultation and permit individual consultation where a transfer affects a business with fewer than 50 employees or where fewer than ten staff are affected
While some of the changes announced were expected, arguably, the Regulations do not appear to go as far as many of the previews indicated, particularly about holidays and holiday pay.
The Regulations remove the requirement for employers to keep detailed records of the duration of time worked each day by each worker as long as the employer can demonstrate compliance in some other way. The government viewed the previous requirement, which was initially instituted as a result of a Court of Justice of the EU decision, as disproportionate and so the Regulations aim to cut down the administrative burden on businesses concerning this requirement.
Holidays and Holiday Pay Calculations
The most substantial changes being instituted by the new legislation is about holidays and holiday pay. The legislation aims to simplify the existing rules and calculations for employers about certain workers.
Holiday entitlement remains at 5.6 weeks, comprised of 4 weeks from EU law and 1.6 weeks from domestic law, as the Government has not proceeded with the proposal to combine the two portions of annual leave.
Concerning holiday pay, the rules around ‘normal remuneration’ (which provide that holiday pay should include sums related to regular commission or overtime) still apply to the 4-week EU-derived portion but will not apply to the 1.6 weeks afforded by UK law. That preserves the current legal position but, in practice, to keep calculations simple, many employers choose to pay holidays according to the ‘normal remuneration’ rules across the entire 5.6 weeks of holiday entitlement.
Probably the most significant change, relates to rolled-up holiday pay, which will be lawful for part year (those who as part of their contract are required to work only part of the year where there are periods of at least a week where they do not work and are not paid) and irregular hour workers (those whose paid hours are wholly or mostly variable). Rolled-up holiday pay is an additional amount paid with the individual’s normal pay instead of when they take their holiday. To be clear, this does not take away the right to request holiday but essentially means that when holiday is taken, it will not be paid.
Previously, rolled-up holiday pay was ruled unlawful but this legislation recognises that there are some circumstances under which rolled-up holiday pay is beneficial to worker and employer. It’s worth noting, however, that this is not compulsory. Employers can still elect to pay holiday pay as they do at the moment and workers cannot request rolled-up holiday pay. But, in many cases, particularly for those who work rarely or for short periods of the year, this is a welcome change to the law.
For those employers looking to utilise rolled-up holiday pay, they should ensure that they are clear on payslips what portion is normal pay and what portion represents the rolled-up holiday portion and ensure that their workers receiving this understand that they will not be paid if they do decide to take their holidays later.
From next year, an accrual method to calculate holiday entitlement and calculate rolled-up holiday pay will be 12.07% of hours worked in a pay period for part-year and irregular-hour workers only.
The right to carry over holidays has also been codified in the Regulations, much of the legal framework having derived from EU case law, such as where the worker is on maternity (or other related) leave, is off sick, or where the employer has not afforded the worker reasonable opportunity to take holidays (among others).
Employees and workers should also be aware that any holiday which they have been able to carry over as a result of Covid legislation will need to be used by 31 March 2024, as the Covid-19 relaxations in relation to carrying over holiday will come to an end on 1 January 2024.
Many of these changes simply confirm and put into statute what is already the legal position as derived from EU law but the changes around rolled-up holiday pay represent the biggest departure and one that employers should be aware are on the horizon in the year ahead.
If you have any questions on this on any other area of Employment law, please get in touch with Blackadders Employment Team, working in Aberdeen, Dundee, Edinburgh and Glasgow, and across Scotland.