Following the publication of the Department for the Economy's 'Good Jobs' consultation response in April, Northern Ireland is preparing to introduce key measures aimed at modernising its employment law framework, including reforms to pay and benefits and proposals for a right to disconnect.
On 28 April, Dr Caoimhe Archibald, the newly appointed Minister for the Economy, published the Department's summary of responses to the 'Good Jobs' Employment Rights Bill consultation. Alongside this, the Department issued its official response paper, outlining the proposals it now intends to seek Executive approval for. We wrote about this here.
Two of the key changes announced under Theme B: Pay and Benefits, relate to calculation of holiday pay and the introduction of a statutory Code of Practice on the right to disconnect. In this article we look at the proposals outlined by the Department for the Economy and what they mean for in employers in Northern Ireland.
Holiday Pay: A simpler approach?
Employees or workers are entitled to receive 5.6 weeks' paid holidays in each leave year, consisting of four weeks leave based on EU law and 1.6 additional weeks provided under domestic law. For many workers, the amount of pay received for their holiday depends on their hours worked and how they are paid. Pay received during leave should reflect what the worker would have earned if they were working.
This is relatively straightforward for workers who receive fixed pay but becomes more complicated for workers with irregular hours and variable pay, who do not receive the same amount in each pay period.
Position in NI
In NI, the current position for workers with variable hours and pay is that employers should look back at the worker's previous 12 weeks' pay (known as the holiday pay reference period) to calculate their pay for a week's leave. This method can be burdensome for employers and, more importantly, may result in incorrect entitlements which do not reflect a worker's normal pay, especially for those with seasonal or irregular hours.
Increase to 52-week reference period
In its consultation response, the Department has confirmed that it proposes to legislate to increase the reference period for calculating holiday pay from 12 weeks to 52 weeks, acknowledging that the longer reference period would be simpler for employers to administer and would also remove seasonal variations in the amount of holiday pay a worker might receive.
Using a 52-week reference period is also in line with GB and the Supreme Court's findings in Chief Constable of the Police Service of Northern Ireland v Agnew.
This development will undoubtedly be welcomed by the majority of employers. In fact, 87% of respondents to the consultation were in favour of changing the calculation period and, notably, it was one area in which Trade Unions and employers agreed there was a need for change, with 88% of both groups in favour of moving to a 52-week reference period.
What about other changes to holiday pay?
The positive news is that there have been some favourable developments regarding holiday pay. However, other changes to holiday pay that have applied in GB since January 2024 were not addressed in the consultation, nor was there any indication that these issues will be considered in the near future.
There are currently no plans to allow rolled-up holiday pay for part-time or irregular workers, nor to introduce a new system for accruing annual leave entitlement at 12.07% of hours worked at the end of each pay period.
Additionally, there is no proposal to introduce a two-year backstop for claims relating to underpayment of holiday pay. One of the most significant cases in 2023 was the Supreme Court's decision in Agnew, which has increased financial risk for employers in both GB and NI who have not calculated holiday pay correctly.
Issues regarding remedies and the calculation of payments
following Agnew remain unresolved while employers, employment
lawyers, HR professionals, tribunals and conciliation services deal
with the backlog of holiday pay cases stayed pending the Supreme
Court's decision. These include whether cost of living
increases and interest should be factored into calculations, and
whether retrospective payments should date back to 1998 (when the
Working Time Regulations were introduced in NI) or to 1996 (when
the Directive required their introduction).
In GB, regulations impose a two-year limit, or a 2 year
'backstop', on unlawful deductions claims brought after 1
July 2015, thereby limiting employers' financial exposure.
Although the consultation response acknowledged concerns raised by
respondents, there are currently no plans to introduce such a
backstop in NI.
Right to Disconnect: Striking the right balance?
As we previously explored here, the right to disconnect or switch off from work is a growing trend around the world, originating in France where legislation was introduced in 2017, followed by countries such as Italy and Spain. Closer to home, Ireland introduced a Code of Practice on the right to disconnect in 2021, which aims to create a culture of good work-life balance and break bad habits where people feel obliged to respond to messages out of hours.
In GB, introducing a right to disconnect was first discussed in Labour's 2021 Green Paper, with a promise to bring in the "right to switch off" which would be "a new right to disconnect from work outside of working hours and not be contacted by their employer". However, this was ultimately left out of the new Labour Government's recent Employment Rights Bill and seems unlikely to be progressed further at this point.
Change to working practices
Currently, this area, together with working time limits, rest breaks and annual leave etc. are governed by the Working Time Regulations (Northern Ireland) 2016. The 'Good Jobs' consultation acknowledged that there has been significant change to working practices over recent years, largely due to the COVID 19 pandemic, with a shift to home working and tech innovations creating a culture for some workplaces where staff feel they are always "on call", with working and rest time frequently becoming blurred.
The consultation therefore sought views on whether the current legislative framework was fit for purpose and, particularly, whether it provided adequate protection for employees, or whether NI should join the growing trend for formal regulation of this area.
Statutory Code of Practice
In its response, the Department has proposed to implement a Statutory Code of Practice on the Right to Disconnect. Although falling short of legislation, the Department reached the view that a Code of Practice would strike the right balance between protecting employees and supporting economic development.
Although we have not been provided with details of what the Code will look like in practice, the Department has noted the support for the Code of Practice introduced in the Republic of Ireland in 2021 and we might expect to see similar provisions within any Code ultimately adopted in NI.
The Code of Practice, in practice
The notion of a right to disconnect will not be without its challenges, particularly for employers operating internationally where there is a need to coordinate work across multiple time zones, or for those in senior or other positions, who are required to be available to address urgent matters or emergencies.
Distinction might also be necessary between being "on call" and simply being "contactable". Furthermore, it is unclear how a right to disconnect would interact with the proposed expansion of the flexible working regime, which will likely see the emergence of increasing numbers of irregular working patterns.
The Department has confirmed that it will work with social partners to agree a Code, but it has also acknowledged the need for flexibility and potential exemptions for certain businesses including those operating internationally, businesses in the hospitality sector, those providing sickness cover, and emergency response workers. It will, undoubtedly, be necessary to establish clear channels of communication between employers and employees when putting the new Code into practice.
When can we expect the changes?
It is unlikely that we will see any of these changes implemented in the immediate future. The Department has estimated that it will introduce a draft bill by January 2026 with the aim that it will be passed into law before the end of the Assembly's current mandate in May 2027. We expect that a Code of Practice on the Right to Disconnect will be introduced within a similar timeframe.
What should employers do now?
Nothing is happening right now, but you could start reviewing your current approach to the calculation of holidays and staff working patterns to understand how these changes might affect your business:
- If you have populations of workers who are paid overtime, commission, or allowances etc., ensure that this is being factored into holiday pay correctly;
- If holiday pay is calculated using a 12-week reference period, review this against a 52-week reference period to understand what impact (if any) this will have on staff. You may need to discuss this change with any recognised trade union;
- Review time recording obligations to help assess how frequently and to what extent employees are working outside of their core hours;
- Assess workplace culture and whether there are any toxic working habits in particular teams or departments;
- Consider other measures to better improve your employees' ability to switch off; and
- Consider whether any contracts or policies require updating in the near future.
The 'Good Jobs' Employment Rights Bill consultation response is available here.
Our NI Employment Law Reform Impact Hub is available here and our Dashboard with a full analysis of all the proposals is available here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
