Included in the new regulations and measures outlined by the Government on 27th March 2020 was the measure that employees who have not been able to use all of their statutory annual leave entitlement as a direct consequence of the coronavirus, would be able to carry it over into the next two years.
The Working Time (Coronavirus) (Amendment) Regulations 2020 SI are now in force. They amend The Working Time Regulations 1998 (WTR) to relax the restriction on carrying over untaken annual leave into the next leave year where leave has not been taken because of the COVID-19 pandemic.
The new rule covers the four weeks of annual leave provided for by Reg. 13 WTR but not the additional 1.6 weeks of annual leave provided for by Reg. 13A, which already has different rules on carry over attached to it.
New measure to allow employees to carry over annual leave
Announced by the Business Secretary, Alok Sharma, on Friday 27th March, the new measure means that affected workers across the UK can continue working in support of their employers’ effort to continue business against the coronavirus impact without losing out on the bulk of their annual leave entitlement, if they are unable to take it.
Previously, under the WTR, employees would not generally be able to carry over their annual leave entitlement between leave years, and only in circumstances where employment was terminated could unused leave be replaced by a payment.
The new rule means that in circumstances where it is not reasonably practicable to take annual leave, affected workers will be allowed to carry over up to four weeks of unused annual leave into the next two leave years, making it easier for employers to ensure that their employees are using their statutory amount of annual leave in the year.
Furthermore, this new regulation will mean that employers will have the flexibility to allow their employees to carry over leave, instead of granting annual leave requests at a time which could leave them short on staff numbers.
Upon announcing the measure, Alok Sharma commented:
“Whether it is in our hospitals, or our supermarkets, people are working around the clock to help our country deal with the coronavirus pandemic.
“Today’s changes will mean these valued employees do not lose out on the annual leave they are entitled to as a result of their efforts, and employers are not penalised.”
Although the key intention of the new rules was to grant flexibility in respect of employers of key workers, who are so busy that they cannot take holiday in their usual holiday year, there has been some concern raised by employers generally that they feel this will encourage employees to avoid taking holiday especially where they are on some form of paid leave already.
While employers will be able to allow or even require carry over where there is a good coronavirus-related reason to do so, this does not necessarily mean that it must do so. While carry over is now permitted, workers who are not on sick leave or statutory family related leave (maternity, paternity, etc.), can still be told by their employer to take statutory annual leave on particular dates, provided that they are given the required amount of notice. The amount of notice will be as contained in the contract of employment. If silent, the default position is that twice as much notice as the period of holiday leave to be taken must be given.
Guidance published by ACAS states that employers should still be encouraging employees to take their paid holiday and employees should continue to make requests for paid holiday throughout their holiday year. Therefore, employers can still require employees to take pre-booked annual leave and decline cancellation requests or suggest that the proportionate amount of leave is taken in shorter blocks by the end of the holiday year, if the reality is that there is nothing preventing the employee from actually taking the booked leave.
What about furlough and annual leave?
The interaction between furlough and holiday continues to be a hot topic at the moment.
Until last Friday 17 April, the official Government guidance was completely silent on the issue of whether an employee can take holiday, or an employer can require their employee to take holiday, whilst on furlough and there have been conflicting views on this issue.
The Government has now updated its guidance for employees on the Coronavirus Job Retention Scheme (CJRS) to provide slightly more clarity on the issue of employees taking holiday whilst on furlough. This states:
“You can take holiday whilst on furlough. Working Time Regulations (WTR) require holiday pay to be paid at your normal rate of pay or, where your rate of pay varies, calculated on the basis of the average pay you received in the previous 52 working weeks. Therefore, if you take holiday while on furlough, your employer should pay you your usual holiday pay in accordance with the WTR. Employers will be obliged to pay the additional amounts over the grant, though will have the flexibility to restrict when leave can be taken if there is a business need.”
The above suggests that taking holiday whilst furloughed will not break a period of furlough or render an employer ineligible to reclaim 80% of wages under the CJRS. It also suggests that an employer will be obliged to top up any holiday pay in respect of any period of holiday taken whilst an employee is on furlough to make this up to 100% of the employee’s pre-furlough pay, despite not being able to reclaim that entire amount under the CJRS.
Notwithstanding the above, the Treasury Direction (which sets out the formal legal basis and rules of the CJRS) and the employer’s guidance on the CJRS do not comment on this issue. Therefore, whilst employees can seemingly take annual leave while on furlough and receive their normal pay for it (although this is not set out in the Treasury Direction or employer’s guidance), important questions remain such as whether an employer can compel an employee to take annual leave during furlough (thereby using up holiday entitlement partly at the expense of the CJRS). The employee guidance goes on to say that “During this unprecedented time, we are keeping the policy on holiday pay during furlough under review.” Therefore, we anticipate further guidance on this tricky issue in due course.
Keep holiday entitlements under review
In these uncertain times it is important to try and proactively keep holiday entitlements under review to avoid situations where lots of staff want to take all of their holiday at the same time after the pandemic restrictions have been lifted. Employers should:
- Monitor individual holiday allowances over the coming months;
- Where possible, encourage staff to take their holiday when they can during the current holiday year, bearing in mind the benefits of maintaining good mental health and well-being for employees and the importance of taking rest; and
- If necessary and where sufficient staffing can be maintained, consider requiring employees to take their holiday at certain times.
For further information relating to this measure, please click here.