The key responses are set out below:
Holiday pay
Single annual entitlement
The government has confirmed that it will not take forward the proposal to introduce a single annual leave entitlement as this would only be beneficial if there was a single rate of holiday pay. The government will maintain two distinct "pots" of annual leave and the two existing rates of holiday pay so that workers continue to receive four weeks at the normal rate of pay and 1.6 weeks at the basic rate of pay. Regulations 13 and 13A of the Working Time Regulations 1998 ("the WTRs") will remain distinct types of leave. The government has committed to legislate to clarify what must be included in normal remuneration for holiday pay purposes. The government also states that it is considering more fundamental reforms to the rate of holiday pay.
Rolled-up holiday pay
The government proposes to introduce rolled-up holiday pay for irregular hours workers and part-year workers (including some agency workers). Rolled-up holiday pay enables workers to receive an enhancement to their pay in respect of holiday pay instead of being paid holiday pay when they actually take leave. Recognising the concerns some may have over rolled-up holiday pay, in that it may disincentivise workers to take leave, the government considers the existing safeguards proportionate in addressing these concerns.
The 12.07% accrual method
The government will also legislate to introduce an accrual method to calculate entitlement at 12.07% of hours worked in a pay period for irregular hour workers and part-year workers in the first year of employment and beyond. Other workers will continue to accrue annual leave in their first year of employment as they do now by receiving 1/12th of the statutory entitlement on the first day of each month and to pro-rate it thereafter.
Following the Harpur Trust ruling the government consultation originally suggested that the holiday pay problem might be addressed by introducing a 52-week holiday entitlement reference period for part-year workers and workers with irregular hours, based on the time spent working over the previous 52-week period. Concern was raised by a number of respondents that this would create a huge administrative burden for employers, as well as issues for workers whose hours varied year on year and for workers in their first year of employment. Opting for a simplified approach the government will introduce the 12.07% of hours worked method.
Carry over of holiday in relation to maternity/family related leave and sick leave
The government is going to restate various pieces of retained EU case law that it considers necessary to retain workers' overall level of protection and entitlement. This restatement is in relation to carry over of annual leave when a worker is unable to take their leave due to being on maternity/family related leave or sick leave and introducing a method of accrual of annual leave for irregular hours and part-year workers when they have had other periods of maternity/family related leave or sick leave.
Record keeping requirements under the WTRs
The government has confirmed that it will go ahead with the proposed changes to the record-keeping requirements under the WTRs. The government will clarify that businesses do not have to keep a record of all daily working hours of all their workers. The clarification is necessary following the Court of Justice of the European Union case of Federación de Servicios de Comisiones Obreras (CCOO) v Deutsche Bank SAE. Employers will still need to keep adequate, proportionate records in the context of a given workplace and particular working patterns to demonstrate compliance with the WTRs as is currently prescribed in legislation.
TUPE
The government will proceed with the planned reforms to the TUPE consultation requirements. These reforms will allow small businesses (with fewer than 50 employees) undertaking a transfer of any size, and businesses of any size undertaking a small transfer (of fewer than ten employees) to consult their employees directly if there are no existing worker representatives in place.
Comment
Wasting no time the government has already laid the draft statutory instrument before parliament, with a "coming into force" date of 1 January 2024. We will keep you updated.
Holiday pay is notoriously complex and a huge administrative burden for employers. The clarification set out in the consultation response will be welcomed by employers who have been grappling with constantly changing case law over recent years.
If you would like any legal advice with regard to the issues raised in this update please do not hesitate to get in touch.
