COVID-19: Managing holiday and extension of carry-over provisions

Updated on 02 July 2020 

COVID-19 is causing issues for employers at every turn. Whether it is the Coronavirus Job Retention Scheme or the status of those on self-isolation, there is something new to get to grips with as each day passes and the right to take holiday is no exception.

In an effort to relieve a potential operational challenge, the government has introduced a temporary change to the Working Time Regulations 1998 (WTR) which allows workers to carry over up to four weeks of holiday for up to two years if issues relating to COVID-19 have prevented the worker from taking it.

What is the statutory holiday entitlement?

The WTR grant most workers a statutory right to 5.6 weeks’ paid holiday each year. Taking leave is seen as key from a health and safety perspective. As such, holiday entitlement cannot, generally, be carried over into subsequent holiday years. Workers must 'use it or lose it' and employers must ensure their workers have adequate opportunity to take their 5.6 weeks in the holiday year. The key exceptions to this are where the employer and employee agree otherwise (up to 1.6 weeks of statutory leave can be carried forward into the following year), or where an employee has not been able to take their statutory leave due to (usually long-term) sickness or family leave (e.g. maternity leave).

What is changing?

The Working Time (Coronavirus) (Amendment) Regulations 2020 (the 'Regulations') amend the WTR to extend the circumstances in which statutory leave can be carried over to subsequent holiday years.

The Regulations state that where it was ‘not reasonably practicable’ for a worker to take some or all of their leave as a result of the effects of coronavirus (including on the worker, the employer or the wider economy or society), the worker will be able to carry forward up to four weeks of their untaken leave. The carried-over leave must be taken in the two subsequent leave years.

This change is principally aimed at relieving pressure on those sectors employing key workers where there are real issues arising as a result of the amount of work that needs to be done and the inevitable high levels of sickness absence. However, the changes apply to all workers provided they meet the criteria above. The ‘not reasonably practicable’ requirement means that coronavirus will need to have had a genuine impact on the individual worker’s ability to take their leave for the carry over to apply, so this should not be used as a carte blanche by all employers to refuse or cancel holiday requests for the foreseeable future particularly if they are not significantly affected by the pandemic. 

There are various factors for an employer to consider when deciding whether it was ‘not reasonably practicable’ for a worker to take some or all of their statutory annual leave as a result of the effects of coronavirus. The government has issued guidance and examples on their website in relation to what may be seen as ‘reasonably practicable’, and notes some of the factors employers should take into account. Those factors include, an increase in business demand due to coronavirus, the level of disruption to the workforce due to coronavirus, the effect of the employee taking leave on wider society’s recovery from coronavirus and the employee’s wellbeing and need for a break. Employers are also encouraged to consider any practical alternative measures available to avoid carrying forward an employee’s holiday.

Employers should do everything reasonably practicable to ensure that the worker is able to take as much of their leave as possible in the year to which it relates.  It is also not in an employer’s interests to have significant numbers of employees amassing holiday to take at a later date unless this is absolutely necessary.  In particular, the guidance notes that employees on furlough leave are unlikely to need to carry forward statutory annual leave, as they will be able to take it during the furlough period.

However, for employers who need all hands on deck and for employees whose leave is being cancelled due to lack of staff, this will be welcome news.

Furlough

The government has also had to include guidance on the taking of holiday for those who are furloughed by virtue of the Coronavirus Job Retention Scheme.

Having been silent on the point for some time, the government guidance on the Coronavirus Job Retention Scheme now covers the interplay between holiday and furlough. Statutory holiday must accrue whilst an employee is on furlough. Any additional holiday to which the employee is entitled under their contract of employment will also continue to accrue unless you have agreed otherwise with the employee as part of their furlough arrangements. The guidance also confirms that an employee can take holiday whilst on furlough leave without it disrupting their furlough leave. If an employee is flexibly furloughed then any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours. However the guidance makes clear that employees should not be placed on furlough simply because they are taking holiday.

The WTR require holiday pay to be paid at the employee’s normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received by the employee in the previous 52 working weeks. This means that employers will need to make appropriate ‘top ups’ to the pay of employees who take holiday whilst on furlough. You are not permitted to claim for these top-ups under the Scheme but you will still be able to claim up to 80 per cent (or £2,500 per month) of pay for holiday taken during furlough leave under the CJRS.

Can employers require an employee to take holiday and/or refuse to allow an employee to cancel holiday?

Not all employers will need their employees to cancel or carry over holidays and indeed some employers are having to manage requests from employees who want to cancel pre-booked holidays because they can no longer carry out their original plans. So can the employer require an employee to take holiday or prevent an employee from cancelling annual leave?

Under the WTR an employer can require an employee to take statutory holiday on specified dates, whether or not the employee is on furlough leave, provided the required notice (as set out in the WTR) has been given. (Your own contractual arrangements may apply to any holiday that you give in excess of the 5.6 weeks). The notice should specify the days on which leave is required to be taken, and the length of notice given must be at least twice the period of leave that the employer wants the employee to take. So for example, an employer who wants an employee to take five days holiday must give the employee at least 10 days’ notice. A 'relevant agreement' (which can include the contract of employment) may vary or disapply this procedure so check the terms of the contract first.

There is nothing in the WTR which prevents an employee from seeking to cancel a day’s holiday so an employee’s right to cancel (if any) will be as set out in the contract of employment or staff handbook. Usually this means the employer will have the discretion as to whether or not to agree to any request for cancellation so whilst you will now need to consider the impact of the new Regulations, you should in most cases, still be able to manage requests according to business need.

As the purpose behind the Working Time Directive is to protect a worker’s health and safety, when your holiday year falls will influence any strategy on this. Workers may be happy to use up holiday where little of the holiday year remains, but if you are at the start of a holiday year, you should consider leaving workers with the opportunity to take holiday at a later point in the leave year. If you are requiring employees to take holiday or if you are refusing a request to cancel a holiday, it will be also be important to consider each individual’s circumstances in order to avoid potential issues of indirect (or direct) discrimination. A consistent approach will be important from an employee relations perspective but, where business reasons dictate that differing practices can be justified, it will be sensible to record these in case of challenge.  Before requiring employees who are on furlough to take holiday, in accordance with government guidance, employers should engage with the employee and explain its reasons for wanting the employee to take leave and consider whether any restrictions the employee is under, such as the need to socially distance or self-isolate, would prevent them from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday. Employers should therefore consider individual circumstances and the current level of government measures before requiring employees to take leave – the recent easing of measures in England might assist employers in this respect.

Key steps to manage holiday entitlements

It will be important to proactively manage holiday entitlements so that you are not left short-staffed after the pandemic with lots of staff wanting to take holiday at the same time:

1. Monitor individual holiday allowances over the coming months;
2. If possible, encourage workers to take their holiday when they can during the current holiday year. Employers should be mindful of the benefits of maintaining good mental health and wellbeing for employees and the importance of timely rest;
3. If necessary, consider requiring employees to take their holiday at certain times; and
4. If you have employees on furlough consider how you will approach the issue of holiday. 

If you have any questions about how these changes (or any other COVID-19 measures) will affect your business, please contact Luke Bowery or anyone in the Burges Salmon Employment team, who would be happy to advise you.

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