HOLIDAY AND TUPE LAWS OVERHAULED POST-BREXIT

In what has been billed as arguably the most significant change in holiday legislation since the advent of the Working Time Regulations in 1998, the government has announced changes to the calculation of holiday pay which will come into law when the Employment Rights (Amendment Revocation and Transitional Provisions) Regulations become law on 1 January 2024.
 
Our readers will be well aware that the entitlement to paid annual leave has given rise to a number of significant decisions about what constitutes “normal remuneration” for the purposes of calculating holiday pay, with the high-water mark perhaps being the Bear Scotland case and the resulting implications on holiday pay calculations for employers who require their workers to work overtime and pay other work-related allowances.

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"...the government is legislating to exclude irregular hours and part-year workers from the normal holiday provisions in the WTR and, instead, add a new set of provisions setting out their holiday entitlement. Under the new provisions, holiday will accrue at the rate of 12.07% of the hours worked by the worker in the previous pay period and employers will have the ability to pay holiday pay in advance by applying an uplift of 12.07% to their pay."

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Bear Scotland was a decision which was heavily influenced by European case law under the Working Time Directive which, in view of Brexit, UK tribunals now have significant leeway to depart from, to the potential detriment of workers. To protect workers, therefore, the government is introducing a new definition of “normal remuneration” in the Amendment Regulations which will encompass anything already included in the statutory definition of a week’s pay (found in the Employment Rights Act), together with:
 
- Payments, including commission, intrinsically linked to the performance of tasks which a worker is contractually obliged to carry out.
 
- Payments for professional or personal status relating to length of service, seniority or professional qualifications
 
- Payments, such as overtime payments, which have been regularly paid to a worker in the previous 52 weeks
 
Worker rights in relation to holiday carry over which derive from existing EU case law will also be preserved to protect employees. To address this, the Amendment Regulations will include a right of holiday carry over in the following situations:
 
- Where a worker was unable to take holiday due to being on maternity leave or other statutory leave under Part 8 of the Employment Rights Act 1996.
 
- Where a worker was unable to take holiday due to sickness.
 
- Where the employer has failed to recognise a right to holiday, or a right to paid holiday.
 
- Where the employer has failed to give the worker a reasonable opportunity to take holiday or has failed to encourage them to do so.
 
- Where the employer fails to inform the worker that holiday not taken will be lost at the end of the leave year.
 
However, what the government gives with one hand, it takes away with the other, albeit from a different group of workers (those who work irregular hours or only part of the year). Readers will recall the consternation caused by the Supreme Court’s decision in Brazel and the potential bonanza for this type of worker if only weeks where the worker actually works are taken into account for determining the amount of holiday pay, thereby putting the worker in a better position than somebody working regular hours: See: https://www.horsfieldmenzies.com/articles/le28m5xwdj4xdr5xpdk7zoeqsnzo47?rq=BRAZEL 

To address this inequity, the government is legislating to exclude irregular hours and part-year workers from the normal holiday provisions in the WTR and, instead, add a new set of provisions setting out their holiday entitlement. Under the new provisions, holiday will accrue at the rate of 12.07% of the hours worked by the worker in the previous pay period and employers will have the ability to pay holiday pay in advance by applying an uplift of 12.07% to their pay. Note that the government has been clear that rolling up holiday pay in this way will not be allowed in other cases.
 
In view of these changes, one of the first jobs for HR in the New Year should be to review their contracts and handbooks to ensure that they comply with the new legislation and, if appropriate, consider changing any practices in relation to irregular hours workers which may currently go further than the new law will require. If you require any assistance with this, please contact your usual Horsfield Menzies adviser.
 
TUPE
There is another small change which will be included in the Amendment Regulations which will be helpful for employers relating to the duty to inform and consult in the context of a TUPE transfer. Currently, there is a requirement, for all but micro businesses with fewer than 10 employees, to elect employee representatives for the purposes of informing and consulting about a TUPE transfer where there are no existing representatives in place. The Amendment Regulations will extend this exclusion so that:
 
- employers with fewer than 50 employees will not have to elect representatives; and
 
- larger employers will not have to elect representatives if the TUPE transfer involves fewer than 10 employees.
 
This will certainly simplify some TUPE processes for employers. However, note that there will still be an obligation to inform and consult directly with the employees, rather than through representatives. So, the risk of an award of up to 13 weeks’ pay per affected employee remains for employers who do not inform and consult properly.

EMPLOYMENT APPEAL TRIBUNAL DECISION
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