Employment Law General Update – January 2024

Welcome back to another year of invaluable insights and updates in the dynamic world of employment law. This month, discover the upcoming changes and trends that will shape employment law in the early months of 2024, stay compliant with the most recent holiday pay regulations by accessing the latest government guidance, and learn about ACAS’s updated Code of Practice for handling flexible work requests and adapt to the evolving landscape.

As ever, stay informed and up-to-date with Dixcart Legal.

What’s in store for Employment law in early 2024?

There are four pieces of legislation that came into effect on 1 January 2024.

First, the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 amends the Working Time Regulations in relation to paid holiday for irregular hours workers and part-year workers from 1 April 2024, plus in relation to the calculation of normal pay, the carrying forward of paid holiday and record-keeping requirements. These regulations also expand the information and consultation obligations on small businesses under TUPE for transfers on or after the 1 July 2024.

The second piece of legislation was the Equality Act 2010 (Amendment) Regulations 2023. They make various changes to the Equality Act 2010 to reproduce certain interpretive effects of retained EU law which would otherwise cease to apply in the UK after the end of 2023. They include amending the definition of disability to take into account a person’s ability to participate in working life on an equal basis with others, providing an express right to claim indirect discrimination by association and preserving the single source test for equal pay comparisons.

The third and fourth pieces of legislation are the Retained EU Law (Revocation and Reform) Act 2023 (Commencement No. 1) Regulations 2023 and the Retained EU Law (Revocation and Reform) Act 2023 (Consequential Amendment) Regulations 2023. They make fundamental changes including abolishing the principle of supremacy of, and general principles of, EU law, as well as replacing references to ‘retained EU law’ with the term ‘assimilated law’ in UK legislation (including the Equality Act 2010).

A significant change which came into force on 6 January 2024 (under section 1 of the National Insurance Contributions (Reduction in Rates) Act 2023) was the reduction from 12% to 10% in the employee primary Class 1 National Insurance Contributions rate, as announced in the government’s recent Autumn Statement.

From 22 January 2024 the maximum civil penalty for the illegal employment of an adult who is subject to immigration control will triple, from £20,000 to £60,000 for each offence pursuant to the Immigration (Employment of Adults Subject to Immigration Control) (Maximum Penalty) (Amendment) Order 2023.

Looking forward to April 2024, there will be two sets of regulations affecting the national minimum wage coming into force on 1 April 2024. The first, the National Minimum Wage (Amendment) Regulations 2024, will increase the minimum rates for workers, including the new rate of the national living wage of £11.44 an hour for the first time to all those aged 21 and over. The second set of regulations, the National Minimum Wage (Amendment) (No. 2) Regulations 2023, will remove the exemption for live-in domestic workers so that nannies and au pairs will have to be paid the national minimum wage.

Then, on 6 April 2024, the right to request flexible working will become a day one right (under the Flexible Working (Amendment) Regulations 2023) and the rate for Statutory Sick Pay will increase to £116.75 per week (under the Social Security Benefits Up-rating Order 2024). In addition, on that date, two family-friendly pieces of legislation will come into force:

  1. the Maternity Leave, Adoption Leave and Shared Parental Leave (Amendment) Regulations 2024 will extend existing protections if an employee is on maternity, adoption or shared parental leave when a redundancy arises, so that those protections also apply during pregnancy, and for a period of time after the relevant leave has ended; and
  2. the Carer’s Leave Regulations 2023 will allow employees to take up to one week of unpaid leave per year to provide, or arrange, care for a dependant with a long-term care need.

Also in April 2024, the rate of Statutory Maternity Pay (and other family related statutory payments) will increase to £184.03 per week (also under the Social Security Benefits Up-rating Order 2024).

Finally in this round-up, on 9 May 2024, two sets of regulations relating to trade unions will come into force (the Trade Union Act 2016 (Commencement No. 6) Regulations 2023 and the Trade Union (Deduction of Union Subscriptions from Wages in the Public Sector) Regulations 2023). These will have the combined effect of restricting when relevant public sector employers can make deductions from their workers’ wages in respect of trade union subscriptions.

As if that was not enough, other legislation to look out for that is not Employment law-related but relevant for all companies is the Economic Crime and Corporate Transparency Act 2023 in relation to the failure to prevent fraud. Companies House has published a blog post on 22 January 2024 detailing the initial changes which will apply from 4 March 2024: Get ready for changes to UK company law – Companies House (blog.gov.uk)

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Holiday Pay: Government publishes new guidance on pay and entitlement

The government has published new guidance on the holiday pay and entitlement reforms from 1 January 2024. The guidance covers the meaning of an irregular hours worker and a part-year worker, holiday entitlement for these workers, carry-over of leave and holiday pay calculations.

The government has now published guidance to accompany the changes made to the Working Time Regulations 1998, SI 1998/1833, by the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023, SI 2023/1426, with effect from 1 January 2024.

The guidance is arguably of more limited impact than anticipated because:

  • it expressly states that:

‘It does not provide definitive answers to all individual queries. It is not intended to be relied upon in any specific context or as a substitute for seeking advice (legal or otherwise) on a specific circumstance, as each case may be different.’

  • in relation to some grey areas, the guidance just restates the legislation and does not provide any examples of what factually would meet the requirements set out (e.g. in relation to what an employer must do to give a worker a reasonable opportunity to take their leave and encourage them to do so);
  • it does not expressly address the issue of whether or not annual bonuses should be included in holiday pay calculations.

The guidance does, however, include illustrative examples of who would, and would not, fall within the definitions of an irregular hours worker and a part-year worker. In relation to the latter category, the guidance states that a worker with an annualised (flat) salary over 12 months would not qualify as a part-year worker even though there are periods of one week or more when they are not working as there are no weeks in which they are not receiving pay.

What does the guidance cover?

The guidance covers:

  • the definitions of an irregular hour worker and a part-year worker
  • holiday entitlement for these workers
  • carry-over of leave, and
  • holiday pay calculations.

Some particular points worth highlighting are set out below.

Irregular hours and part-year workers

The guidance gives examples as to who would fall within or outside these definitions.

The examples demonstrate that a truly zero hours (casual) worker would count as an irregular hours worker whereas a worker on a rotating (but fixed) two-week shift pattern, for which the number of hours alternates, would not.

The guidance explains that part-year workers with fixed hours, for example, teaching assistants who only work during term-time, and who are paid only when working, would count as part-year workers. However, workers with an annualised (flat) salary over 12 months (e.g. most teachers) would not count as a part-year worker as there are no weeks where such a worker is not receiving pay.

Holiday pay rates and order of leave

The guidance explains that in respect of full-year workers who are legally entitled to 5.6 weeks of paid statutory holiday entitlement per year:

  • the first four weeks of this entitlement must be paid at a worker’s ‘normal’ rate of pay
  • the remaining 1.6 weeks’ entitlement can be paid at ‘basic’ rate of pay.

The guidance notes that:

‘The regulations do not state which entitlement should be used first. Many employers choose not to distinguish between the 2 pots of leave, and to pay the entire 5.6 weeks at the ‘normal’ rate of pay. If an employer wishes to pay different holiday rates for different periods of leave, then they should consider explaining this clearly and consistently to the worker, for example in the worker’s contract or staff handbook.’

Annual bonuses

The guidance does not expressly deal with the question of whether annual bonuses should be included when calculating holiday pay. However, the principles set out in the guidance may assist in how this issue is to be determined. For example, the guidance states that:

‘Holiday pay is based on the legal principle that a worker should not suffer financially for taking holiday. The amount of pay that a worker receives for the holiday they take depends on the number of hours they work and how they are paid for those hours. Pay received by a worker while they are on holiday should reflect what they would have earned if they had been at work and working.’

This would support the exclusion of an annual bonus when calculating holiday pay in circumstances where the annual bonus (and its amount) is paid irrespective of the number of weeks of annual leave taken, as to do otherwise would result in the worker being paid more for the period of holiday than their normal pay.

The position is not so straightforward, however, where bonuses are linked to performance which is related to time worked, as in that scenario a worker taking their full entitlement to annual leave may get a reduced bonus compared to a worker who took no annual leave.

It may be that employers will choose to make it clear in their bonus policies or schemes that workers are encouraged to use their full entitlement to annual leave and will not be penalised in terms of bonus for doing so, in an effort to clearly put themselves into the former rather than the latter category, and exclude annual bonuses from holiday pay calculations.

Starting to use rolled-up holiday pay

For irregular hours and part-year workers, for holiday years starting on or after 1 April 2024, employers can choose to use rolled-up holiday pay.

In terms of practicalities, the guidance states that:

‘If employers intend to start using rolled-up holiday pay, they should check their workers’ contract in case this amounts to a variation of contract. Employers should tell their workers if they intend to start using rolled-up holiday pay and for this payment to be clearly marked as a separate item on each payslip. The holiday pay should be paid at the same time as the worker is paid for the work done in each pay period. Employers of agency workers must include this information in the agency worker’s Key Information Document.’

The guidance also notes that if the employer chooses to use rolled-up holiday pay then the entire amount of leave for irregular hours and part-year workers will be paid at the ‘normal’ rate of pay.

The Government guidance can be found here: Holiday pay and entitlement reforms from 1 January 2024

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Flexible Working: ACAS publishes a revised Code of Practice on requests for flexible working

The Advisory, Conciliation and Arbitration Service (ACAS) has published its revised Code of Practice on requests for flexible working. The revised Code of Practice will come into effect in April 2024. Until then the current Code of Practice will continue to apply. The Draft Code of Practice was originally published as part of an ACAS consultation in July 2023. The consultation closed on 6 September 2023.

Following the consultation, ACAS has made a number of changes to what is now the revised Code of Practice. These are:

  • providing that guidance on consulting with an employee about a flexible working request recommends that where the original request cannot be fully met, employers discuss with the employee any potential modifications
  • ensuring that formal meetings following the acceptance of a flexible working request are no longer required
  • providing an extended list of categories of companions allowed to accompany an employee to a request meeting. However, the Code of Practice makes clear that there is not statutory right of accompaniment
  • recommending that all organisations (not just larger ones) ensure a different manager deals with an appeal over a flexible working request.

All other areas proposed in the initial draft Code of Practice will remain.

The ACAS consultation can be found here.

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Further Information:

If you would like any additional information, please contact Anne-Marie Pavitt or Sophie Banks on: hello@dixcartuk.com

The information provided within this document is for general informational purposes only. While every effort has been made to ensure its accuracy, no responsibility can be accepted for inaccuracies. Readers are advised that laws and practices may change over time. This document is provided solely for informational purposes and does not constitute accounting, legal, or tax advice. Professional advice should be sought before making any decisions based on the contents of this document.