News & Insights

Significant Changes to Working Time, TUPE and Non-Compete Restrictions Proposed

On 10 May 2023, the Government published a policy paper ‘Smarter Regulation to Grow the Economy’ promising significant changes to Working Time Regulations, TUPE and Non-Compete Restrictions.

The Government’s Paper is one of the first waves of proposed changes to employment legislation following Brexit. It seems the Government is focusing on reducing the ‘red tape’ of regulation for businesses, which they say can be an unnecessary burden and limit their ability to innovate. The proposed regulatory reform is designed to decrease cost of living and drive economic growth.

The Paper sets out a number of measures intended to grow the economy, but the three key proposals impacting on all employers are:

Changes to the Working Time Regulations 1998 (WTR) and rolled up holiday

The Government notes that a number of regulations in the WTR are valuable, but some are disproportionate and create unnecessary administrative burdens. As a result of this, the Government is proposing to remove retained EU case law that requires businesses to keep working time records for almost all members of their workforce.

There is also a proposal to reduce the administrative burden and complexity of calculating holiday pay. This would include the introduction of rolled up holiday pay and merging basic and additional leave entitlements under the WTR into one annual leave, which would encompass the same amount of total leave. This would be a significant change to the current framework, as rolled up holiday pay is currently not permitted. Any changes implemented by Government will need to be accurately reflected in employer’s contractual documents and policies. Such a change will also need to be carefully balanced with protecting workers from a health and safety perspective, ensuring they take proper breaks for safety and both their physical and mental health.

Change to the application of TUPE Regulations for smaller businesses

For businesses with fewer than 50 employees and transfers affecting less than 10 employees, the Paper is proposing to remove the requirement to elect employee representatives for TUPE consultations. Businesses would therefore be able to consult directly with the affected employees, and the Government suggests this will improve engagement with workers and will reduce the administrative burden without changing employee rights.

Limiting non-compete clauses to 3 months

The Government has said that post termination restrictions in employment contracts are useful for protecting businesses, but notes that burdensome clauses have become the norm in too many contracts. They claim this can inhibit workers from moving jobs freely, looking for better paying roles, and limits the ability of businesses to compete and innovate.

This proposal is to limit non-compete restrictions in such contracts to 3 months. Currently, the length of time for such a restriction can vary, depending on worker seniority, and what is reasonable in the circumstances. It is currently not clear if existing clauses that are for longer than 3 months would be void altogether or only enforceable up to the limit.

If this change were implemented, it is estimated that it would affect up to 5 million UK workers.  Limiting non-compete clauses will not interfere with the ability of employers to use paid notice periods, garden leave, non-solicitation clauses, confidentiality clauses, or restrictions on public sector employees under the Business Appointment Rules.

This will be introduced when Parliamentary time allows, so whilst the change is not yet imminent, the proposal is now on the horizon.

The effect of these proposals

This Paper illustrates that the Government’s new stance is that introducing regulations should be a last resort, so a ‘smarter framework’ is looming which ensures future regulation is proportionate and reduces business burdens.

The Government has also suggested that this is a signal to regulators that driving innovation, investment and growth should be at the heart of what regulators do.

Employers will need to keep an eye on these proposals, as any implementation of changes will affect an employer’s process, and will require amendments to employment contracts, handbooks and policies. Although there is still a long way to go before these proposals become binding, it is useful to start thinking about and being proactive and prepared prior to any changes. Our employment team would be happy to discuss the implications of these changes on your business and help you begin planning.