UK Government Proposes Changes to Holiday Pay, TUPE & Restrictive Covenants – What Employers Need to Know

Last week the Government published a paper titled “Smarter Regulation to Grow the Economy”. The paper introduced proposed changes for three areas (holiday pay, TUPE and restrictive covenants) which will have significant implications for employers. James Twine, Employment law expert, reveals all and offers legal support below.

Holiday Pay

While we have not yet been furnished with the detail, the Government have confirmed that they will be introducing “rolled-up holiday pay”, merging normal and additional holiday pay so there is one entitlement and removing the obligation for record keeping of hours, all proposals will be welcome news for employers, particularly rolled-up holiday pay.

Until very recently, rolled-up holiday pay was consistently used by employers for employees with variable hours; in simple terms it involved paying employees an increased hourly rate (typically 12.07%) as opposed to calculating and paying holiday pay when employees take annual leave.

While technically it was unlawful, it was popular with employers as an alternative to the administrative burden of calculating how much holiday an employee or worker had accrued each time they worked. Employees and workers were content with the arrangement. as were employers, safe in the knowledge that while it was technically unlawful, no compensation would be due if a claim was issued, because this would already have been off-set by the 12.07% previously paid.

This was until the world was turned upside down by the infamous decision in Harpur v Brazel which set out new rules and left employers with complicated calculations and some bizarre results including part-year workers receiving more holiday pay than an employee who worked every week of the year, but worked the same number of total hours as the part-year worker. The decision made little sense and last week’s announcement should correct the position.

What we do not know, is when or how the new rules will be introduced; and in the interim employers are left in limbo – have you already changed your contracts and methods of calculation, if so, should you revert to the new system before it is officially introduced, or are you still operating under the pre-Brazel regime and could be exposed to the risk of claims? How you best navigate this minefield, will be fact specific and dependent upon a number of variables including your appetite for risk, current systems and flexibility.

Here at Wolferstans, we have an expert team of employment solicitors who can support you through this process and help to identify and then implement the optimum solution for your business.

TUPE - Transfer of Undertakings (Protection of Employment) regulations

The paper also announced that where a business has less than 50 employees, and fewer than 10 employees are transferring to a new employer, there will be no obligation to elect employee representatives or comply with the red tape of collective consultation. This change will have limited impact, given it will only bite where there is the transfer of part of a business, involving nine or fewer employees, transferring from a total of 49 or fewer, but it will reduce the burden on employers in those circumstances.

Non-Compete Clauses

While finally, the paper confirmed that the Government intends to limit the length of non-compete clauses (restrictive covenants) to a maximum of three months. This will be a significant change and employers will no doubt be nervous over the possibility of employees leaving and potentially being free to set up in competition or target their clients after only three months.

Again, we do not have any detail – will it be limited to working for a competitor and soliciting clients or include poaching ex-colleagues and dealing with former clients who approach your former employee? What will be the mechanism for amending existing clauses, will there need to be some form of valid consideration (which is the current position), and most importantly, what can employers do to protect their businesses given the new rules? We are currently working on solutions for employers and will have options available for you once the new rules have been clarified.

If you require advice or support in relation to any of the above, please contact James Twine on 01752 292351 or jtwine@wolferstans.com and stay tuned on our social media platforms to ensure you are kept informed as more detail is published.