405: Regulation reform to grow the economy: what Employment Law changes can we expect?

This month, the Government published a policy paper titled Smarter regulation to grow the economy. The paper aims to set out a practical and proportional framework for UK businesses to operate within. Reducing bureaucracy is envisaged to provide a boost to the British economy in the aftermath of Brexit.

The proposed reforms to Employment Law regulation include the following key changes:

Cap on Non-competes

The Government plans to introduce a limit on the length of non-compete restrictions in employment contracts to just three months. This is to allow more flexibility for employees to join competing businesses or start their own business, which would in turn benefit the wider economy. The cap would only apply to post-termination covenants. It will not interfere with the ability of employers to use paid notice periods, gardening leave or non-solicitation clauses. Since introducing this change will require the passing of primary legislation, it is unlikely to be implemented soon. If it is brought in, we may start to see longer notice periods in contracts, particularly for senior employees.

Holiday Pay

Currently, it is unlawful for employers to include a holiday pay amount in a worker’s rate of pay. The suggested reform is for workers to be able to receive ‘rolled-up’ holiday entitlement (ie an extra 12.07% could be added on to their payslip to reflect holiday payment). It is unclear whether this will apply to all workers or casual workers only, and safeguards would be needed to ensure the leave was in fact taken. In addition, the two current separate leave entitlements (four weeks per year under EU law and the extra 1.6 weeks per year granted under UK law) are to be merged into one pot of statutory annual leave of 5.6 weeks. It is not clear whether this will affect the calculation of holiday pay (eg whether it will still be necessary to include commission, overtime etc. within holiday pay).

Recording of Working Time

The Working Time Regulations 1998 imposed record-keeping requirements on employers, aiming to track the working time of all workers and keep those records for two years. The proposal is to remove this requirement, although keeping time records may still be needed to evidence compliance with the national minimum wage.

TUPE Consultation Requirements

Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), employers are required to appoint representatives for the purposes of consultation on a TUPE transfer (unless the business has fewer than 10 employees). The reform proposes that where a business employs less than 50 staff and the transfer affects less than 10 employees, employers will be able to liaise with the employees directly. In practice, this would only apply when a part of a business is transferred, rather than the whole business.

Sunset Clause

The Retained EU Law (Revocation and Reform) Bill initially included a sunset provision that would result in all EU-derived laws automatically expiring at the end of 2023, unless a statutory instrument was passed to preserve them. This position is now reversed: EU law will remain binding unless revoked by statute. A list of EU laws the Government aims to revoke by the end of 2023 has been published. There are only a few employment-related statutory instruments that will cease to be effective then, all of which are relatively niche.

While the proposed reforms are fairly wide-ranging, there is no timeframe yet for implementation, and it remains to be seen to what extent they will be taken forward.

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