Horizon Scanning — UK Employment Law Developments 2024

As employees return from the holiday season and businesses reopen, employers and HR leaders should be mindful of key employment developments in 2024 that may affect their workforce. 2024 will see a number of legislative changes in UK employment law that will require employers to get up to speed swiftly. A raft of new legislation will (or has already) come into force to address the consequences of Brexit. Other legislative proposals are also being mooted by the government, but with a general election looming in 2024, employers will need to keep an eye on the status of those proposals and further changes that may be proposed.

This article summarises some of the key updates for businesses making their 2024 to-do lists to consider.

Holiday Pay

On 1 January 2024, the UK government brought into force legislative changes to either incorporate or replace certain EU-derived employment rights that may otherwise have been lost as part of the government’s post-Brexit legislative amendments. From an employment perspective, the most significant changes come in the form of new regulations, the Employment Rights (Amendment, Revocation and Transitional Provisions) Regulations 2023. These regulations clarify rules relating to holiday entitlement and working time records and will take effect for holiday years commencing after 1 April 2024.

In particular, the new regulations preserve EU case law that sets out when workers who cannot take annual leave in one year will have an express right to carry unused leave forward to the following year. Namely, this includes workers who are unable to take annual leave in a given holiday year because they have taken sick leave, have been on statutory leave (e.g., maternity or similar family leave), or have been prevented from taking such leave by their employer.

The new regulations will also incorporate EU-derived protections on calculating holiday pay, with certain payments intrinsically linked to a worker’s obligations needing to be taken into account when calculating holiday pay (e.g., commission payments, overtime, and certain bonuses). While we are not seeing a large number of holiday pay claims in practice, a renewed focus on holiday pay entitlement may impact that position.

Finally, the government has also clarified that irregular hours or part-year workers’ annual leave will accrue based on 12.07% of hours worked in the previous pay period. Deviating from the position under EU case law, the government has permitted employers to adopt rolled-up holiday pay arrangements to address fluctuations that may arise. We expect the return of rolled-up holiday pay will be gratefully received by employers looking for a practical way of managing such workers.

Flexible Working and Extended Redundancy Protection

Upcoming developments to flexible working arrangements and expanded safeguards for certain individuals facing redundancy will impact employers’ current practices and policies.

The Flexible Working (Amendment) Regulations 2023 will come into force on 6 April 2024 and will allow employees to submit a flexible working request from the first day of their employment (rather than having to be employed for 26 weeks before being eligible to do so, as provided under the current regime). Moreover, the new regulations will allow employees to submit two flexible working requests in any 12-month period (an increase from the current entitlement of just one request in any 12-month period) and will require employers to respond to such requests within two months of receiving them. While the proposals stop short of giving employees the right to work flexibly, employers will need to assess whether their current flexible working policies remain fit for purpose. Failing to properly engage with flexible working requests may potentially open up employers to a range of claims, including indirect discrimination, for which compensation is uncapped and can be costly. Employers who carefully consider their current approach to responding to flexible working requests (and each individual’s circumstances) will be better placed to navigate issues around working patterns that may arise. In addition, a new statutory right for workers (including agency workers) to request a more predictable working pattern is due to come into force in September 2024, which may impact how businesses engage those workers going forward.

Another area where employers’ current policies and practice will need to develop is in the context of redundancies. Draft regulations are due to come into effect in April 2024 that will enhance redundancy protection for pregnant workers and working parents. The draft regulations will extend the existing right to be offered a suitable alternative vacancy in a redundancy scenario (which currently applies to employees on maternity, adoption, or shared parental leave) to employees who are due to go on, or have recently returned from, such leave. Again, employers will need to assess whether their family planning and leave policies need to be adapted for these changes and will need to take this into account if any redundancies are proposed.

TUPE

For businesses acquiring or selling assets or services in respect of which the Transfer of Undertakings (Protection of Employment) Regulations 2006 apply, reforms simplifying the information and consultation process are due to come into effect in July 2024. Namely, the existing carve-out for small employers (i.e., those who employ fewer than 10 employees), which allows them to undertake the information and consultation process mandated under TUPE directly with employees (rather than relying on existing or electing new employee representatives), will be extended to employers with fewer than 50 employees. This legislative change will likely ease the administrative process businesses face when transferring employees in this context and reflects the practical workarounds some employers already deploy.

Hiring and Firing and Non-Competes

Two key areas in which employers should look out for potential changes are “fire and rehire” practices and the enforceability of non-competes in employment contracts.

The government’s response to its consultation on the draft code of practice regarding fire and rehire is expected to be published in Spring 2024. The draft code is a response to several high-profile fire and rehire exercises undertaken by businesses. If it comes into effect, it is expected to present additional considerations and steps for employers who are contemplating the use of fire and rehire to implement changes to employees’ terms and conditions. Due to the public relations implications of undertaking a fire and rehire process, it is likely that, notwithstanding the new code, most employers will already be cautious about using this method to effect changes to their employees’ terms and conditions.

Separately, the government has announced that it intends to limit the duration of non-compete restrictions in employment contracts to three months. While the commitment to do so “when Parliamentary time allows” suggests this proposal may not take effect (if at all) until after the general election, employers will need to be mindful of its potential impact on terms they negotiate with their workforce (particular senior managers). This proposed limitation may lead to more employers relying on alternative ways of ensuring sufficient business protection provisions are included in employment terms. In particular, employers may push for senior managers to be subject to longer notice periods and explicit garden leave provisions should they need to keep departing employees out of the market for longer than three months. In some cases, employers may be more willing to offer equity to such senior managers on the basis that they may be subject to additional and separate restrictive covenants tied to their shareholding (given that the proposed restriction will not apply to non-competes individuals enter into in the capacity of shareholders or vendors).

Next Steps

The legislative developments summarised above are only some of the changes employers will need to be mindful of. In addition to legislative reforms, as expectations on work arrangements develop in the aftermath of the COVID-19 pandemic and Brexit, employers who are proactively reviewing their policies and practices will be best placed to attract and retain employees and to handle questions or issues that may arise.

Please contact any member of Goodwin’s Employment team in the UK if you would like support with employment matters.

 

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee a similar outcome.