Insights Government responds to recent employment consultations – a serious shake-up for holiday and TUPE laws?

On 8 November 2023, the Department for Business and Trade published their response to two recent employment law reform consultations. The first consultation launched in January 2023 and focussed on the calculation of holiday pay for part-year and irregular workers, and the second commenced in May 2023 and sought views in respect of: (1) simplifying holiday pay calculations and permitting ‘rolled-up’ holiday pay; (2) reducing the record keeping requirements under the Working Time Regulations 1998; and (3) simplifying the consultation requirements under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) (see our prior commentary here in respect of this).

These are significant changes to UK employment law and will have implications for most employers, regardless of sector. However, the holiday changes in particular will require careful thought from Film and TV businesses, with contractual changes likely to be required in a number of scenarios.

From a holiday pay perspective, the government’s response indicates a watering down of what had originally been proposed. This is perhaps understandable, as reasonable concerns were raised regarding the suggestion that rolled-up holiday should be permitted for all types of worker. Although we will be undertaking a more detailed review into the implications these reforms will have (particularly in the context of our Film and TV clients), we have set out our initial thoughts below.

Firstly, the government’s response confirms that they will legislate for a percentage-based method of holiday accrual for irregular hours and part-year workers, based on a rate of 12.07% of the hours worked during that pay period. For the avoidance of doubt, the proposed legislation will not support this method of accrual for ‘regular’ hours workers.

Within the Film and TV industry, a percentage-based method of calculating holiday pay is widely used (save that a 10.77% accrual rate is, in our experience, more commonly used for perfectly legitimate reasons), so this change is welcome despite it likely not being directly applicable to a large number of workers in the industry (who work more regular hours). We will be considering the wider implications of this new legislation, but our initial thoughts are that now the government is proposing to legislate permitting a percentage accrual rate in certain circumstances, it will prove harder to justify using a different rate (i.e., the 10.77% rate) going forward with other types of worker. Production companies may therefore wish to consider moving to a consistent approach to accrual across their crew members (subject to the below considerations relating to rolling up holiday pay).

Secondly, the government has decided to legislate to permit rolled-up holiday pay (i.e., paying a worker’s holiday pay at the same time as their basic pay) but, rather than allowing this for all workers (as had originally been proposed), this change will also only apply to irregular hours and part-year workers. It would appear that certain conditions will need to be met for this to be permissible and employers will be required to calculate the sum of the rolled-up holiday based on the worker’s total earnings in a pay period.

Given that this change will only affect a certain group of workers, it will not provide a full safety net for the Film and TV industry in respect of how holiday is dealt with across the myriad of ways people are engaged in the industry. It will however provide a helpful solution for dealing with holiday pay in certain engagements, particularly daily hires who are likely to fall into the category of irregular hours workers. Even with those types of workers, rolling up will not be mandatory, so production companies will need to assess whether they want to roll-up when they presumably won’t be doing so across the board.

These reforms are clearly significant, and many employers (regardless of sector) will need to revisit holiday clauses in their contracts. However, for production crew contracts, it is likely that a careful commercial analysis may also be required to minimise the potential for concerns and disruption.

Under the current Working Time Regulations, employers are required to keep accurate records of the time their workers’ work each day. However, the plan is to legislate to remove this obligation, significantly reducing the administrative burden currently placed on employers and providing clarity as to what the obligations in practice are, given the evident confusion from those that responded to the consultation. This is a sensible change, although it must be noted that employers will likely still need to keep adequate records in order to ensure they comply with the regulations.

Finally, the government has confirmed that they will proceed with their planned reforms to TUPE enabling employers to consult with staff individually, rather than collectively, if their business has fewer than 50 employees or the transfer affects less than 10 employees. This again is a very sensible improvement to the current regulations and should provide helpful flexibility to both small and large businesses.

In addition to responding to the consultations, the government also published a draft statutory instrument to implement the changes. They are therefore clearly serious about this, and in fact it is proposed that if approved through parliament the reforms will come into force on 1 January 2024, with the 12.07% accrual rate applying and rolled-up holiday pay being permitted (on the limited basis outlined above) for holiday years from 1 April 2024 onwards.

We will be monitoring and considering the impact of these changes as they develop due to the government stating in their response that they intend to make further reforms related to holiday pay in the future.