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Relaxation of the holiday carry-over rules during COVID-19 pandemic

In an effort to support key industries during the COVID-19 crisis the Government announced a temporary relaxation of the rules on carrying over untaken holiday. The new rules will allow employees and workers to carry over up to 4 weeks’ paid holiday into their next 2 holiday leave years. This will apply where workers have not been able to take their statutory annual leave entitlement due to coronavirus.

Previous position

The Working Time Regulations 1998 (WTR) give workers 5.6 weeks of annual leave in each leave year. This leave is separated as 4 weeks under European law (basic leave) and a further 1.6 weeks under domestic legislation (additional leave). Employees may be entitled to more leave under their individual contracts of employment. The WTR provides that 4 weeks of leave must be taken in the leave year to which it relates and the additional 1.6 weeks can be carried forward one leave year by agreement with the employer. There are special rules to allow carry over of holiday accrued during maternity leave or long term sick leave.

Employers should note that they do have an obligation to ensure their workers have the opportunity to use their statutory entitlement in each leave year and failure to do so can result in a financial penalty. Employers are not permitted to make a payment in lieu of accrued statutory holiday entitlement unless an employee’s employment contract has been terminated.

New relaxed measures

On 27 March 2020 the Government announced new relaxed measures. The amendments to the WTR allow workers to carry over up to 4 weeks of annual leave where it was not ‘reasonably practicable’ to take this leave as a result of the effects of COVID-19. The unused leave can now be taken in the 2 leave years immediately following the year in respect of which it was due to be taken. This amendment does not apply to the additional 1.6 weeks of leave (but this can still be carried over by agreement into the next holiday year in accordance with the normal rules).

What is reasonably practicable?

When considering whether leave can be carried over employers should consider various factors including:

  • Whether the business faced a significant increase in demand due to coronavirus that would reasonably require the worker to continue to be at work;
  • The extent to which the business’ workforce is disrupted by the pandemic;
  • The health of the worker and how soon they need to take a period of rest and relaxation;
  • The length of time remaining in the workers leave year to enable the worker to take holiday at later date;
  • The extent to which the worker taking leave would impact on the wider society’s response to the pandemic;

Furloughed workers

The guidance notes that furloughed workers are unlikely to need to carry over leave because they are able to take leave during their furlough. It is important however that employers ensure that employees are paid the correct rate of holiday pay as this is likely to be higher than the 80% rate of pay which was covered by the Government under the Coronavirus Job Retention Scheme so the employer would have to make up the difference.

The guidance specifically details that if the employer is unable to make up the difference, perhaps due to the impact of coronavirus, then it’s likely it would not be ‘reasonably practicable’ for the employee to take their leave and therefore allow them to carry their leave forwards under the new relaxed rules.

Other points that employers should be aware of:

  • It is best practice to allow workers to take the holiday to which they are entitled in the new leave year before the ‘carried holiday’ under the new relaxed rules as this ‘carried holiday’ lasts for 2 years.
  • Any ‘carried holiday’ under the new relaxed regulations is subject to further protection. For an employer to be able to refuse to allow a worker to take ‘carried holiday’ on particular dates, the employer must have ‘good reason’.
  • Whilst there is no statutory requirement to give workers notice that they will be able to carry holiday forward if they do not take it, it is best practice for employers to inform workers about the ability to carry forward.
  • Employers cannot replace ‘carried leave’ with a payment in lieu. If a worker leaves employment however then an employer must pay the worker for any untaken leave including any ‘carried leave’ under the new relaxed rules along with any leave that the worker has accrued in the relevant leave year.

Our specialist Employment Lawyers have many years’ experience in advising businesses and individuals. If you require our advice, please call us on 0808 252 5231 or request a call back online at your convenience.