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Employment Update: The Government’s Proposals

Employment Update: The Government’s Proposals


On 10 May 2023 the UK Government (‘Government’) announced its intention, namely through its policy paper “Smarter regulation to grow the economy”, to change the legal framework surrounding holiday pay entitlement, TUPE consultations and non-compete post termination restrictions. The finer details of the Government’s proposals are further set out within the Department for Business and Trade’s “Retained EU Employment Law: Consultation on reforms to the Working Time Regulations, Holiday Pay, and the Transfer of Undertakings (Protection of Employment) Regulations” published on 12 May 2023.


Holiday Pay Entitlement

Currently a worker is entitled to an overall entitlement of 5.6 weeks of leave with 4 weeks of that entitlement deriving from the EU Working Time Directive and the additional 1.6 weeks arising as a purely UK entitlement. The two current leave entitlements have different requirements and conditions and those distinctions have been a source of confusion for both workers and employers.

The Government has indicated its intention to merge the rules on ‘normal’ and ‘additional’ leave creating one pot of annual leave entitlement for all workers in Great Britain. The proposal will replace the two current distinct entitlements and will create a single statutory annual leave entitlement which will also set out the minimum rate that holiday pay should be paid at. It is hoped that such change will assist in reducing the administrative burden and complexity of calculating holiday pay for employers whilst maintaining the same overall holiday entitlement of 5.6 weeks for workers.

A further proposed change to current legislation would see the Government introduce ‘rolled-up’ holiday pay as an additional option for holiday payment for all workers. ‘Rolled-up’ holiday pay refers to the practice of not paying holiday pay whilst the worker is on holiday but making additional payment during the weeks that the worker works to cover pay due in respect of holiday periods.

The Government’s proposal would allow an employer to make a choice between using the existing 52-week holiday pay reference period to calculate holiday pay or to use ‘rolled-up’ holiday pay as the method of calculation for workers with irregular and regular hours. The Government’s proposal would be that ‘rolled-up’ holiday pay is paid at 12.07% of a worker’s pay on each pay slip, as 12.07% is the proportion of the year taken up by statutory annual leave. This percentage would need to change if the worker was entitled to leave that is greater than the statutory entitlement.  Any employer who adopts rolled up holiday pay will need to make their workers aware if they adopt such a practice and this payment would have to be clearly marked on a worker’s payslip as their holiday pay. There will need to be some clear thought given to ensure that workers are not deterred from taking holiday.


TUPE Consultation Requirements

As the law currently stands, an employer can only consult directly with employees regarding a TUPE transfer if it employs fewer than 10 employees (a micro business) and there is no existing appropriate representative in place, for example there is no recognised trade union. If a business does not meet those criteria, there is a legal requirement to consult with a recognised union or elect employee representatives.

The Government has proposed that small businesses, that is those businesses with fewer than 50 employees (and with no existing employee representatives in place), and also businesses of all sizes where the transfer concerns less than 10 employees can consult with directly with those affected employees. The Government has indicated that it hopes such change will improve employer engagement with workers and simplify any transfer process whilst reducing the administrative burden on employers. Direct consultation with employees would only be allowed if no existing employee representatives were in place.


Restrictive Covenants: Non-Compete Clauses

Restrictive covenants are commonly used by employers to protect their business interests by restricting the activities of an employee, generally after employment has ended. The impact and potential scope of such clauses has, for some time, been subject to debate.

The Government has announced its intention to limit the scope of non-compete clauses, a form of restrictive covenant which restricts an employee’s ability to work for a competitor or set up a business in competition with the employer’s business for a specific period of time and normally within a certain geographical area, to a duration of three months.

With that said, primary legislation is required to alter the current statutory framework and the Government has indicated that legislation to implement such changes will be introduced “when Parliamentary time allows”.


This article is for general guidance only and should not be used for any other purpose. It does not constitute and should not be relied upon as legal advice.


If you would like to discuss this article or any recruitment issue in more detail, please contact Simon Bloch of JMW Solicitors LLP either by email at or by telephone on 0161 838 2628.