Government proposes changes to employment law post Brexit to boost Economy

On 10 May 2023, the Government announced its intention to make some fundamental changes to aspects of employment law post Brexit. The intention behind the changes is to improve regulation with the aim to ‘boost the economy’, by reducing burdens and cutting costs for businesses.

The Government also announced they were abandoning the sunset clause in the Retained EU Law (Revocation and Reform) Bill, which means that unless a specific EU employment law is repealed, it will remain in force come 31 December 2023.

The two pieces of retained EU Employment law that the Government has targeted for proposed reforms are, the Working Time Regulations 1998 and the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

Working Time Regulations changes

The Government intends to simplify holiday-based rights. The proposed changes are:

A single annual leave entitlement

Currently, Regulation 13 of the Working Time Regulations, provides for 4 weeks’ leave per year and Regulation 13A provides for 1.6 weeks’ leave per year. A worker would now be entitled to one single leave entitlement of 5.6 weeks per year.

In order to create one entitlement, ‘normal’ holiday leave will now be merged with ‘additional’ leave. This may result in the calculation of holiday pay reverting to the old method, for example excluding commission and overtime, however, this is yet to be confirmed.

Rolled-up holiday pay

The Government intends to reverse the prohibition on rolled-up holiday pay. Rolled-up holiday pay is prohibited under EU law on the basis that it discourages employees from taking holiday. This reform will enable employers to pay an additional enhancement to every payment a worker receives to cover holiday pay. This will likely be welcomed by UK employers who employ casual or short-term workers for whom the calculation of holiday pay can become an administrative burden.

Record keeping

Under the Working Time Regulations, employers have been required to record the number of hours worked by employees to ensure that they do not exceed the 48 hours per week limit. The Government’s proposal to remove this requirement would remove the pressure and reduce the administrative burden on those employers who implemented this system.

TUPE

A proposal that businesses with fewer than 50 employees undergoing a sale or outsourcing that results in the transfer of fewer than 10 employees will no longer have to consult with elected employee representatives and can consult directly with affected employees.

Therefore, where a business has between 10 and 49 employees of whom 9 or fewer are transferring, they will also be exempted from the collective consultation rules. In reality, this can only apply where there is the transfer of part of a business, not a whole business.

Providing businesses with the flexibility to consult directly with affected employees is a positive move, as it would reduce the number of representative elections required.

Restrictive covenants

The Government’s proposal suggests limiting the duration of non-compete clauses to three months. However, this change will not affect non-solicitation clauses or employers’ rights to restrict activities during paid notice periods or paid gardening leave.

It is important to clarify that these are currently only proposals and have not yet been enacted into law. No specific date for implementation has been determined, so employers are advised not to take any immediate action. We will keep you informed and provide an update once the confirmed changes, if any, are announced.

Please note that this information is for general guidance only and should not substitute professional legal advice. If you have specific concerns, we recommend consulting with one of our legal experts.