Corona Advice on annual leave issues for employers and employees

The unique challenges thrown up by the Coronavirus pandemic include HR issues, in particular, what does this mean for the management of holiday entitlement?

What if employees seek to cancel annual leave booked for during the lock-down and use it at a later stage once restrictions have been lifted? Would your business be happy for many employees to end up with a lot of accrued holiday?  Would you prefer employees to take holiday during this potentially quieter time during the crisis?

With the help of our HR experts and new rules the government has recently introduced on the carrying forward of annual leave during the pandemic we hope this is of help for all employers.

Current law on annual leave

•    Holiday entitlement in England and Wales is governed by the Working Time Regulations 1998 (WTR).
•    Under the WTR, workers are entitled to 5.6 weeks’ paid annual leave per year (pro-rated for part time employees). This is made up of 4 weeks required under European law (Basic Leave), and an additional 1.6 weeks permitted under domestic legislation (Additional Leave). Some employees are entitled to more holiday under their contracts of employment.
•    The WTR provides that workers must use their 4 weeks’ Basic Leave entitlement in the leave year in which it is due, otherwise the entitlement will be lost. The 1.6 weeks’ Additional Leave can be carried forward into the next leave year if there is a “relevant agreement” (for example, it is provided for in an employment contract) or with an employer’s agreement. This is subject to exceptions in relation to maternity and sickness cases.
•    Employers are also under an obligation to give workers an effective opportunity to take holiday in the leave year in which it accrues.
•    Under the WTR, it is not possible to make a payment in lieu of accrued statutory holiday entitlement except on termination.

New temporary rules

The government has announced changes to the 4 weeks’ Basic Leave. The government will amend the WTR so as to allow workers to carry-over up to 4 weeks’ holiday into the next two holiday years. This provision will apply where at the end of the year it has not been “reasonably practicable” for a worker to take some or all of this leave “as a result of the effects of Coronavirus (including on the worker, the employer or the wider economy or society)”.

“Holiday” in this case means taking a break from work and not the ability for employees to use that time in any particular way (i.e. abroad or on a UK beach rather than at home).

This change is aimed at helping “key industries” – such as NHS staff who have had annual leave cancelled in order to focus on caring for pandemic victims or delivery drivers.  However, the draft legislation  will apply to all organisations and all workers.

As well as extending the carry-over period, the change also means that: 

•    If a worker’s employment or engagement is terminated during the two-year period, any payment in lieu of holiday must include a payment in lieu of holiday carried over under these provisions.
•    Employers continue to have the right to refuse permission for a worker to take leave on particular days (provided they give notice which is at least as long as the holiday requested). However, under the new regulations, they can only exercise this right where there is “good reason to do so”.

Practical issues 

However, there are still issues which employers will need to consider:

What if I need all my staff deployable?

If you are in a business which is currently providing an essential service, you may want to prevent workers from taking holiday at this critical time. As a result of these changes, you are able to refuse holiday requests if you have “a good reason to do so” (and providing a key service is likely to count as a good reason), and will no longer need to ensure that your workers are given an opportunity take their full holiday entitlement in this current holiday year.

I can’t afford to have a massive holiday accrual in my business

You may want to consider ways in which to manage when employees will be able to use their holiday entitlement (be it in this holiday year or in the next two if carried over). For example:

 a. Under the WTR, employers are able to give workers notice ordering them to take their statutory holiday on specified dates, provided such notice is twice the length of the period of leave the worker is being ordered to take (though this can be varied via a worker’s contract of employment/engagement). This provision is unchanged by the new regulations.

 b. The changes do not apply to the 1.6 weeks’ Additional Leave entitlement or to any contractual holiday entitlement workers might have, which remain subject to any existing agreements on carry-over. Therefore, you may have more flexibility to prevent employees from carrying-over this type leave.

 c. Although it is not possible to make a payment in lieu of statutory holiday, the same restrictions do not apply to enhanced contractual holiday (above the WTR). In some circumstances, there may be scope for you to seek agreement with employees to try to vary the terms about enhanced holiday on a temporary basis, so that this enhanced entitlement is converted into cash and used, for example, to “top up” wages or paid at the end of a holiday year.

What about holiday entitlement and furloughed employees

How will holiday entitlement work for people who are “furloughed” under the Coronavirus Job Retention Scheme?  Unfortunately the new legislation does not address this. 

The government’s guidance on the Job Retention Scheme states that “employees that have been furloughed have the same rights as they did previously”. This strongly suggests that workers on furlough will continue to accrue holiday entitlement while they are furloughed. However, the extent to which furloughed workers can be required to take holiday during a period of furlough, or what pay they might be entitled to if they can take holiday, remains unclear. 

In our view it seems employees can be required to take holiday during furlough and the pay they receive during this time will depend on whether employees are receiving furlough pay as well as topping up or just furlough pay.

What about bank holidays?

If employees cannot take bank holidays off due to the pandemic, they should either use the holiday at a later date in their leave year or include it in the 4 weeks’ paid holiday that can be carried over.

What about previously booked holidays

If an employee no longer wants to take time off they’d previously booked, for example because their holiday’s been cancelled, their employer may still tell them to take the time off.
SRC-Time is one of the South East’s leading accounting firms in advising employers of their payroll, pensions and staffing requirements. If you need help with holiday pay issues our expert payroll team are here to help and can be contacted on 01273 326 556  or you can drop us an email at / or speak with an account manager to get expert help.

SRC-Time Ltd
2nd Floor
Stanford Gate
South Road

T: +44 (0) 1273 326 556
F: +44 (0) 1273 733 827

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