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New UK employment developments – employers should start preparing now

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Image of Kate Pumfrey
Kate Pumfrey

Counsel

London

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11 May 2023

A range of new employee rights have been promised by the Government for some years. These include extended redundancy protection for pregnant workers, the right to request flexible working from day one and the right to neonatal leave and pay. There is still no news on when these changes can be expected but, yesterday, the Government announced a package of different employment reforms as part of its Smarter regulation to grow the economy policy. The areas targeted are non-compete restrictive covenants, the Working Time Regulations, TUPE and retained EU law. Absent from the announcement was any detail or a timetable of when these changes will be implemented. In the meantime, the headline changes and actions employers can take now are set out below.

Non-compete restrictive covenants

Reform of non-competes has been a target of this Government for some time, so this proposal will come as no surprise. What is surprising is that the Government has not chosen either of the two options set out in its prior consultation paper of making non-competes unenforceable, or only enforceable where the employer gives compensation for them. Instead, it has opted to limit the length of non-competes in employment contracts to three months. Although non-competes in employment contracts have generally reduced in length over the last five years, three months is a very short period for senior executives and is considerably less than market standard. It is unclear how current non-competes which are longer than three months will be affected. For example, will these be grandfathered, treated as unenforceable or as enforceable for only three months? It’s also unclear whether the rules will apply to covenants in employment-related documents such as bonus or other incentive plans.

Holiday pay

Further unsurprising news is that changes to holiday pay rules are afoot. Employers must currently apply different, stricter, rules to the four weeks’ EU-law derived portion of holiday than to the 1.6 weeks’ portion, which can be an administrative headache, but the proposals intend for both to be treated the same. This presumably includes applying a uniform calculation rate to the 5.6 weeks, but will this be the lower rate for the 1.6 weeks’ entitlement (for example, to exclude some types of commission and overtime), with a potential cost saving for employers?   

The proposal to allow rolled-up holiday pay (the practice of paying holiday pay with basic pay rather than when holiday is taken, which has been technically unlawful under EU case law for some years) will be welcomed by employers with atypical workers. The proposed scrapping of working time record-keeping obligations will alleviate uncertainty for employers as to what exactly is required, albeit that there has been little or no HSE enforcement action in this area. Employers must, however, be mindful of their other working time obligations, health and safety duties and record-keeping obligations  (for example, in relation to the national minimum wage), which will continue to apply.

TUPE

On the TUPE front, there is a proposed (minor) simplification of the information and consultation process for small businesses. Those with between 10 and 49 employees, which are party to a transfer affecting fewer than 10 employees, will be allowed to consult those employees directly and won’t need to elect employee representatives. This will be a welcome change for these businesses and reflects how such transfers are often approached in practice. Businesses with fewer than 10 employees are already exempt from this requirement. 

Brexit sunset clause

Separately, the Government has announced plans to abandon the controversial sunset clause in the Retained EU Law (Revocation and Reform) Bill, which would have provided for all EU-derived regulations to be automatically revoked on 31 December 2023, unless expressly retained. Instead, only those on a list will be revoked on that date (and the list so far suggests no major statutory changes), while all others will remain in place until such time as they can be reviewed. This is simply buying the Government more time, and there is likely to be more change in store for employers in due course. 


Actions employers can take now

  1. Review your suite of business protections. Identify which of your staff are subject to non-competes and their duration, and what other restrictions or other complementary provisions they are subject to.
  2. Consider how provisions can be shored up to safeguard the business. For example, could renewable fixed term contracts for senior executives be an option to tie them in for the desired periods? Could the length of garden leave be extended but still be considered reasonable?
  3. Audit your holiday pay practices, including your calculation approach, to identify how new flexibility could be utilised. Identify atypical workers who might prefer the option of rolled-up holiday pay.
  4. Continue to comply with working time record-keeping until further notice.  Failure to keep adequate records is still technically a criminal offence.
  5. Keep an eye out for consultation proposals, to get a handle on the detail. 

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