News & Insights

Sweeping Reforms to Employment Law

TUPE, paid annual holiday and the 48-hour working week could all fall away, as the Conservative government looks to remove European employment legislation.

In his “mini-budget” on 23 September 2022, former Chancellor of the Exchequer Kwasi Kwarteng announced that the 2017 and 2021 reforms to the IR35 rules would be repealed, to alleviate “unnecessary complexity and cost for many businesses”. The IR35 rules were introduced to combat tax avoidance by individuals using intermediaries (such as their own limited companies) to supply services to organisations. Where these individuals would have otherwise been deemed to be employees were it not for the intermediary, the IR35 rules ensure that they pay similar levels of income tax and national insurance to employees. You can read more about these rules here.

However, Kwarteng’s replacement, Jeremy Hunt, has confirmed that these IR35 reforms will now not be repealed – so these revisions to the IR35 scheme have, for now, been shelved.

One aspect of Kwarteng’s mini-budget speech which has not yet been abandoned is his promise that the new government will “automatically sunset EU regulations by December 2023, requiring departments to review, replace or repeal retained EU law”, which he claims will “reduce burdens on business, improve growth, and restore the primacy of UK legislation”.

To this end, the Retained EU Law (Revocation and Reform) Bill was introduced to Parliament on 22 September 2022. The Bill sets out that all retained EU law will be repealed on 31 December 2023 (although there is the possibility of an extension to 31 December 2026) unless specific legislation is introduced to keep it in place. This includes any and all UK statutory instruments that were introduced to ensure compliance with EU law.

As a consequence, if the Bill becomes law, the following elements of UK employment law could all potentially change significantly or disappear altogether:

  • TUPE regulations – which, among other things, protect workers from disadvantageous changes to their employment terms where a “relevant transfer” takes place (for example, where the company they work for is subject to an asset purchase).
  • Paid annual holiday – currently, employees are entitled to a minimum of 5.6 weeks of paid annual holiday, under the Working Time Regulations.
  • The 48-hour working week – there is a cap on working hours of 48 hours per week, again under the Working Time Regulations (although this cap is often waived by employees in their contracts of employment).

Clearly, these rights and protections falling away from 31 December 2023 would have a drastic impact on the rights and protections afforded to workers in the UK. It is, of course, possible that the Government could introduce similar, or even more employee-friendly, workers’ rights legislation in the meantime, but that appears unlikely in the current political climate. We will all be “watching this space” very closely!

If you have any questions about IR35, TUPE, holiday or any other employment law matters, please contact us at [email protected]