Changes to the rules on carry-over of holiday have been introduced to help avoid a large build-up of statutory holiday entitlement during this year due to Coronavirus, whilst protecting the rights of workers to take annual leave.  The changes are aimed at preventing a situation where employers are left with trying to ensure that potentially large number of employees all take their mandatory, statutory annual leave by the end of the annual leave year and give employers more flexibility to manage this.

Although the Government’s announcement of these changes (see here) suggests that they are aimed at helping “key industries” – such as NHS staff who have had annual leave cancelled in order to focus on caring for those ill with Coronavirus – in fact the draft legislation makes it clear this is a change which applies to all employers and workers.

Background

Staff have a right under the Working Time Regulations 1998 (WTR) to a total of 5.6 weeks’ annual leave each ‘leave year’, made up of:

• a basic entitlement to a minimum of four weeks’ annual leave (20 days for a regular full-time worker) each leave year, implementing the right to annual leave under the EU Working Time Directive (WTD); and
• an additional entitlement to 1.6 weeks’ annual leave (eight days for a regular full-time worker) each leave year, which is a right under domestic legislation only.

Under the WTR, basic holiday entitlement must (unless for reasons of sickness absence or maternity) be taken in the leave year in respect of which it is due and may not be carried over from one leave year to the next. This means that if a worker does not take their basic holiday entitlement in the year in which it falls due, it will generally be lost.

A worker is also not permitted to be paid in lieu of untaken basic holiday entitlement other than on termination of employment.

What are the changes?

The rules on carry-over of holiday entitlement have been changed by The Working Time (Coronavirus) (Amendment) Regulations 2020.  These Regulations allow workers to carry-over up to four weeks’ basic holiday entitlement into the next two leave years if they have been prevented from taking their holiday because of Coronavirus.

These changes apply only to the four weeks of holiday provided for by the WTD, and not the additional 1.6 weeks’ holiday provided for by WTR.

When can staff carry over holiday?

If it was not “reasonably practicable“ for a member of staff to take some or all of their four weeks’ basic holiday entitlement as a result of the effects of Coronavirus they may carry over such untaken holiday.  The effects of Coronavirus might be on the worker or their employer specifically, or on the economy or society more broadly.

This carried over holiday may be taken in the two leave years immediately following the leave year in respect of which it was due.

Although we do not yet have detail on how to decide when Coronavirus means it is not practicable to take holiday, it may well be a low hurdle to clear.  We wait to see the breadth of circumstances it will include, for example whether it will extend to employees who have cancelled holiday due to not being able to travel due to social distancing requirements or lack of flights.

Can we prevent staff from taking their carried over holiday?

Generally, when it comes to taking statutory holiday, a worker may elect when they wish to take this, but must give notice to their employer.  However, the employer may require the worker:

• to take annual leave on particular days; or
• not to take leave on particular days.

An employer may therefore effectively refuse a worker’s request for leave by serving its own counter-notice.

However, the changes to annual leave due to Coronavirus, restrict the employer’s right to prevent a worker from taking any of their four weeks’ WTD holiday which they have carried over at a particular time.  Employers may only require a worker not to take such holiday where they have a “good reason“ to do so.  Unfortunately, the amending Regulations do not define what would be considered a “good reason“ for this purpose. However, it is likely that employers currently providing an essential service, would be able to use this provision to prevent workers from taking holiday at this critical time.

In respect of the 1.6 weeks’ Additional Leave entitlement under the WTR, or any contractual holiday entitlement workers might have, these remain subject to any existing contractual agreement on carry-over.

Can we require staff to take annual leave?

Many employers will be concerned about the impact on efficiency by needing to accommodate employees with up to an extra four weeks’ annual leave to take over the next two years.

One solution for employers would be to require staff to take a certain amount of annual leave before the end of the holiday year.  Generally, an employer may require the worker to take annual leave on particular days provided they give notice which is at least as long as the holiday required.  Also, legally, there is nothing that prevents someone from being on holiday at a time when they are on “lock-down“ and are expected to stay at home; as “holiday“ just means taking a break from work.

However, if you do wish to require employees to take holiday during the current period of “lock-down“, we recommend you consider how best to communicate this to employees and ensure there are good business or operational reasons to do so. Unilaterally forcing employees to use their holiday entitlement in such circumstances (especially now there is greater flexibility to carry-over) may not be a popular move.  Although some employees maybe persuaded with a financial incentive, such as taking holiday at full pay whilst within a period of reduced pay furlough leave.

What does it mean for payment of accrued annual leave?

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 for any basic, WTD, holiday carried over under these provisions.

However, the same restrictions do not apply to enhanced contractual holiday (above the WTR). Therefore employers with enhanced contractual holiday may have scope to vary any terms about enhanced holiday entitlement to convert it into salary.