COVID-19 Coronavirus Business Impact: Further Guidance on Holiday Entitlements

May 15, 2020

In this OnPoint, we report on the Government’s further guidance on workers’ entitlements to holiday leave and holiday pay during the COVID-19 pandemic.

Introduction

On 13 May 2020, following the announcement of the extension of the Job Retention Scheme until the end of October 2020, the Government published guidance on holiday entitlement and pay during coronavirus (COVID-19) (the “Guidance”). Guidance issued in April addressed the issue of holiday for those who had been furloughed but this additional guidance extends to all workers and provides some welcome clarification, in particular in relation to the carry over of holiday following the amendments made to workers’ ability to roll over their statutory holiday entitlements into subsequent holiday years by the Working Time (Coronavirus) (Amendment) Regulations 2020 (the “Regulations”).

What notice do employers have to give workers to take or cancel holiday?

If a worker is required to take holiday on particular days, the employer must give notice equivalent to double the length of the holiday required to be taken. If an employer wishes to cancel holiday or require the worker not to take holiday on a particular day, notice equivalent to the length of the previously scheduled holiday must be given. It is possible for employers to give less notice in either case provided that the worker agrees.

What should an employer consider when requiring a worker to take holiday during furlough?

The notice requirements set out above apply equally to furloughed workers. Employers should engage with workers on furlough before requiring them to take leave, explaining the rationale. Employers should also consider whether any restrictions imposed on the worker (such as the need to self-isolate) would prevent rest, relaxation and the enjoyment of leisure time and thereby defeat the purpose of the annual leave.

Can a worker be required to work on a bank holiday?

There is no statutory right to time off on bank holidays so the position depends on what the contract of employment states. Employers can require workers to work on bank holidays, provided that they give sufficient notice and ensure that workers still receive their full statutory holiday entitlement for the year.

What should a worker be paid for holiday taken during furlough?

The Guidance states that pay received by a worker whilst on holiday should be calculated in line with current legislation and be based on usual earnings. As we reported previously, if a furloughed worker’s normal rate of pay is higher than the rate of pay during furlough, the employer must pay the difference (even though this cannot be reclaimed through the Job Retention Scheme). That said, the issue of what constitutes normal earnings for these purposes is open to some debate.

How much leave can a worker carry over into the following holiday year?

Generally speaking, 1.6 weeks of the 5.6 week statutory entitlement to annual leave can be carried over into the following holiday year, provided that a written agreement (for example, an employment contract) provides for this. The Regulations provide that workers can carry forward unused annual leave into the two following leave years if it was not "reasonably practicable" for them to take some or all of their leave as a result of the effects of coronavirus (including the effects on the worker, the employer or the wider economy or society).

When is it not “reasonably practicable” for a worker to take annual leave?

The Guidance sets out various factors that should be taken into account in determining whether it was reasonably practicable for a worker to take annual leave, including:

  • Whether the business has faced a significant increase in demand due to coronavirus that would reasonably require the worker to continue to be at work and cannot be met through alternative practical measures;
  • The extent to which the business’ workforce is disrupted by the coronavirus and the practical options available to the business to provide temporary cover of essential activities;
  • The health of the worker and how soon a period of rest and relaxation is needed;
  • The length of time remaining in the leave year to enable the worker to take holiday at a later date within the leave year;
  • The extent to which the worker taking leave would impact on wider society’s response to, and recovery from, the coronavirus situation; and
  • The ability of the remainder of the available workforce to provide cover for the worker going on leave

The Guidance states that employers should do everything reasonably practicable to ensure that workers are able to take as much of their leave as possible in the year to which it relates and, where leave is carried forward, workers should be given the opportunity to take holiday at the earliest opportunity.

Should furloughed workers be permitted to carry over annual leave?

The Guidance confirms that furloughed workers are unlikely to need to carry over annual leave as they can continue to take it during furlough. This contrasts with the guidance published by Acas “Coronavirus: advice for employers and employees” which states that workers may be able to carry over holiday if they have been furloughed and cannot reasonably use it in their holiday year. There may be some circumstances in which it is not reasonably practicable for furloughed workers to be allowed to take holiday – for example, if an employer is unable to fund the difference between a worker’s furlough pay and normal rate of pay. As indicated above, an employer should also consider whether any restrictions on a worker, such as the need self-isolate, would prevent the worker from deriving the intended benefits of holiday.

Should “carried holiday” be treated differently to "normal" holiday?

The Guidance states that it is generally best practice to allow a worker to use holiday from the new holiday year before using any holiday carried over in accordance with the Regulations (“carried holiday”). The reason for this is that holiday relating to the new holiday year cannot be carried forward if unused. The Regulations provide that an employer can only require a worker not to take carried holiday on particular days where the employer has a “good reason” to do so. No guidance has been provided as to what may constitute a good reason.

Should employers inform workers that they will be able to carry over holiday?

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, case law has established that holiday entitlement can only be lost if the worker had an effective opportunity to take it. This requires an employer to show that it provided sufficient information to allow workers to take holiday. The Guidance confirms that it is best practice for employers to inform workers of both the need for and amount of carried leave.

Can workers be required to take holiday that has been carried over?

Employers can require workers to take holiday by giving the requisite notice. The Guidance confirms that this right is unaffected by the ability to carry holiday into future leave years.

Can workers be paid in lieu for holiday that has been carried over?

The Working Time Regulations 1998 provide that statutory holiday entitlement cannot be replaced by a payment in lieu other than on termination. This also applies to carried holiday pursuant to the Regulations and on termination, the worker will be entitled to a payment in lieu of any untaken leave in the current leave year and in respect of any untaken carried holiday.

Conclusions

Employers will need to continue to monitor and address workers’ holiday arrangements carefully as the longer that restrictions on attending work and travelling generally stay in place, the greater the potential for disputes and HR issues more generally in relation to holiday. How employers encourage or require workers to take holiday during lockdown or furlough and how they manage the pent up demand for holiday once travel and other restrictions are lifted, will need careful planning, management and communication.