The period of lockdown and beyond has meant that many staff have not taken much in the way of holiday this year, either because they cannot travel or they are on furlough. We thought it would be useful to share what the government have released on the subject. This should not be construed to be legal advice.

Holiday entitlement

Staff are legally entitled to 5.6 weeks’ paid holiday per year. This normally includes bank holidays.

For the purposes of calculating holiday entitlement, the statutory 5.6 weeks entitlement is split into 4 weeks derived from EU law, and an additional 1.6 weeks from UK law. This guidance focuses on the legal minimum entitlement of 5.6 weeks. Many workers have contracts that entitle them to additional paid holiday beyond this, known as contractual holiday entitlement. Workers and employers can agree to alter the terms of the worker’s contract, providing it does not go below the statutory minimum of 5.6 weeks.

A worker has the same holiday entitlement, regardless of whether they are on sick leave, maternity leave, parental leave and adoption leave, and other types of statutory leave. A worker may request holiday at the same time they are on sick leave but cannot be required to take it while off sick.

Furloughed workers

It will no doubt be useful to consider the holiday rules for staff on furlough.

Do furloughed workers still accrue holiday?

Workers who have been placed on furlough continue to accrue statutory holiday entitlements, and any additional holiday provided for under their employment contract.

Can staff take holiday while on furlough?

Workers on furlough can take holiday without disrupting their furlough.

Can an employer ask staff to take holiday while on furlough?

We are already through part of the summer and accrued leave for furloughed workers will be building up. Employers should consider asking furloughed or non-furloughed staff to take holidays. If all staff leave their holiday unused until towards the end of the year, when they may feel safer to travel, this will impact on businesses at a time when hopefully the economy is more active and staff are required by the business to take advantage of that.

The notice requirements for an employer requiring a worker to take leave or to refuse a request for leave continue to apply. Employers should engage with their workforce and explain reasons for wanting them to take leave before requiring them to do so.

We suggest you engage with your staff to discuss their plans and if they have none in particular, perhaps encourage them to take some while on furlough or while the economy is still inactive. Employers should plan ahead to ensure they do not accept mass leave towards the end of the year, to the detriment of their business. Leave can be carried forward though, see more below.

If an employer requires a worker to take holiday while on furlough, the employer should consider whether any restrictions the worker is under, such as the need to socially distance or self-isolate, would prevent the worker from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday.

Do bank holidays affect furlough?

Where a bank holiday falls inside a worker’s period of furlough and the worker would have usually worked the bank holiday, their furlough will be unaffected by the bank holiday.

What needs to be paid to workers on holiday during furlough?

If a worker on furlough takes annual leave, an employer must calculate and pay the correct holiday pay in accordance with their normal rate of pay and not the 80% they may be paying on furlough.   The employer must pay the difference. However, as taking holiday does not break the furlough period, the employer can continue to claim the 80% grant from the government to cover most of the cost of holiday pay.

Can furloughed workers carry forward unused holiday to next year?

Workers who are on furlough are unlikely to need to carry forward statutory annual leave, as they will be able to take it during the furlough period. But the employer needs to pay normal pay for the holiday period.

Carrying annual leave into future leave years

The 5.6 weeks of statutory holiday is split into 4 weeks and 1.6 weeks, and there are some differences in the rules that apply:

  • the 1.6 weeks can be carried forward into the following leave year if a written agreement exists between the worker and the employer
  • generally, the 4 weeks cannot be carried into future leave years, so employers must facilitate these weeks being taken within the relevant leave year

However, under certain circumstances employers must allow the 4 weeks to be carried into future leave years. Where a worker cannot take annual leave due to them being on maternity leave or sick, employers must still allow workers to carry their annual leave forwards. These rights remain unaffected by a worker being furloughed.

BUT NEW LEGISLATION HAS CHANGED THE RULES

The government has passed new emergency legislation to ensure businesses have the flexibility they need to enable workers to carry holiday forward where the impact of coronavirus means that it has not been reasonably practicable to take it in the leave year to which it relates.

Where it has not been reasonably practicable for the worker to take some or all of the 4 weeks’ holiday due to the effects of coronavirus, the untaken amount may be carried forward into the following 2 leave years. When calculating how much holiday a worker can carry forwards, employers must give workers the opportunity to take any leave that they cannot carry forward before the end of the leave year.

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, and where leave is carried forward, it is best practice to give workers the opportunity to take holiday at the earliest practicable opportunity.

Handling leave that has been carried forward

When a worker carries leave forwards due to the coronavirus, they will continue to accrue holiday in the next leave year. As such, they will have 2 entitlements:

  • the holiday that has been carried forward that must be taken in the next 2 leave years
  • the entitlement that relates to the new leave year

When a worker with multiple entitlements takes holiday, it is generally best practice to allow the worker to take holiday from the entitlement that expires first. In practice, this means that workers should be allowed to take the holiday to which they are entitled in the new leave year before they take the ‘carried’ holiday, as the ‘carried holiday’ entitlement lasts for 2 years.

However, ‘carried holiday’ is subject to further protections – to be able to refuse to allow a worker to take “carried holiday” on particular dates, the employer must have good reason.

The employer may request that the worker takes “carried holiday” instead of their regular entitlement. If they do so, the employer must still ensure that the worker receives their full regular entitlement in the leave year to which it relates, in addition to any carried holiday taken.

Giving notice to workers

There is no statutory requirement to give workers notice that they will be able to carry holiday forward if they do not take it. However, it is unlawful for employers to prevent workers from taking holiday to which they are entitled.

Requiring workers to take annual leave

An employer’s ability to require a worker to take annual leave is unaffected by the ability to carry holiday into future leave years. Where it is reasonably practicable for a worker to take annual leave, employers should facilitate this.

Generally, employers remain able to require workers to take annual leave to ensure that holiday is taken in the leave year to which it relates.

Payment in lieu for carried leave

Carried leave is still subject to the usual rules around payment in lieu. An employer must facilitate the worker taking their annual leave and not replace it with a financial payment (known as payment in lieu).

However, if the worker leaves employment, the employer must pay the worker for any untaken leave. This will include the carried leave under the coronavirus exemption, along with any leave that the worker has accrued in the relevant leave year.

BAYLISS WARE

CHARTERED ACCOUNTANTS

15 July 2020