As the coronavirus pandemic continues its unwelcome and unrelenting intrusion into our work, social and family lives (and not to mention our health and wellbeing), it also continues to present daily challenges for businesses and employers.
This edition of our employment e-briefing focuses on the legal and practical issues faced by employers seeking to manage staff holiday concurrently with the coronavirus pandemic. We explain below the current legal position - highlighting the problems and issues that the new Working Time (Coronavirus) Amendment Regulations, and the furlough scheme, pose for businesses - and provide practical guidance on the steps employers can take to manage holiday during this time.
Current legal position
As a quick refresher for those who are interested, annual leave is governed by both EU and UK primary legislation as well as relevant European Court of Justice (ECJ) and UK case law.
The total statutory annual leave entitlement in the UK is 5.6 weeks, comprising:
- Four weeks’ Basic Leave (Working Time Directive); and
- 1.6 weeks’ Additional Leave (Working Time Regulations 1998)
Statutory annual leave can of course be further enhanced by additional contractual entitlements.
Statutory holiday is also governed by the following general principles;
- Basic Leave must be taken in the leave year in respect of which it accrues.
- Additional Leave can be carried forward by “relevant agreement”.
- Neither Basic nor Additional Leave can be paid in lieu except on termination of employment.
- Employers can require workers to take, or not to take, holiday on specific dates as notified to them pursuant to the statutory provisions (Reg 15 WTR) or as otherwise set out in the contract;
- Workers must receive their normal remuneration for each week’s leave.
EJC and domestic case law have further refined these principles to clarify that:
- Statutory holiday continues to accrue during sick leave (and other forms of statutory leave).
- Statutory holiday can be carried forward from one leave year to the next if it is not reasonably practicable for the worker to take it in the current leave year.
- The holiday pay calculation must include all additional hours worked or allowances earned on a regular or recurring basis (including bonus, commission, overtime etc).
Holiday and furlough
After an ambiguous start, the government has confirmed that statutory holiday (Basic and Additional Leave) continues to accrue during furlough. Any contractual holiday that is provided over and above statutory will also continue to accrue – unless agreed otherwise between the parties.
The Government has also clarified that holiday can be taken during furlough. The principle that workers should not be financially worse off through taking holiday, continues to apply and holiday pay should, therefore, reflect what the worker would have earned had they been at work and working. This is likely to mean employers will need to top up furlough pay to 100% for any holiday days taken during furlough (unless, of course, they already pay full salary during furlough).
Whilst this all sounds straightforward and sensible, once we dig down into the detail, a number of issues arise:
- If a bank holiday falls within a furlough period, can this be deducted from the worker’s statutory entitlement?
There is no general statutory right to take time off on a bank holiday. Whether or not an employee can will depend on the contractual arrangements.
If the contract designates bank holidays as days on which holiday is to be taken then employers may rely on this to designate bank holidays as a day’s holiday (deducting it from the employee’s overall holiday entitlement), without giving the requisite statutory/contractual notice.
If, under the contract of employment, workers are required to work bank holidays, employers will need to provide the requisite statutory or contractual notice if they want the employee to take it as holiday. Otherwise, it will be treated as a working day and the worker will have the ability to take it at another time.
- Whilst many employers might wish to run down workers’ holiday entitlement by requiring workers to take holiday during furlough, there is a risk of workers trying to recover the holiday they have been forced to take during furlough. They may seek to do this by claiming that due to lockdown, the purpose of holiday (rest, relaxation and enjoying leisure time) was not satisfied. The strength of this argument is likely to depend on the circumstances at the time of the holiday taken.
- Finally, if holiday is taken by workers during a period of flexi-furlough, this could lead to perceived unfairness from those who have not been furloughed or who have otherwise been asked to reduce their working hours (with a commensurate reduction in pay and pro-rated holiday accrual).
Flexi-furloughed staff for instance will need to book fewer days’ holiday to get the same amount of time off. Employers will need to consider how they will manage this to reduce the risk of employee relations issues and low morale amongst the workforce.
Working Time (Coronavirus) (Amendment) Regulations 2020 (WT(C)R)
In order to address some of the practical and operational issues that businesses may face in trying to accommodate staff holiday, particularly where businesses may have been closed for a significant proportion of the holiday year, the government has temporarily relaxed the holiday carry over rules.
Under the WT(C)R, the four weeks’ Basic Leave can be carried over in the next two holiday years if it is not “reasonably practicable” for the worker to take the leave “…as a result of the effects of the coronavirus (including on the worker, the employer or the wider economy or society)...”. (Reg (3)(b)).
These new provisions apply to all employers with the aim of enabling them to manage holiday and meeting business demands, whilst also reassuring workers that they will be able to benefit from their holiday at another time.
However, although WT(C)R give employers greater flexibility, they are not a panacea. To some extent, they are the legal equivalent of kicking the can down the road – deferring the problem to another time.
Employers who take advantage of them may risk having a considerable holiday pay bill later down the line, particularly in the event that employees resign or their employment is terminated before they can use up their entitlement.
Furthermore, if employees have accrued a lot of holiday, it is likely leave requests may overlap. Employers will need to consider how they will prioritise leave requests in a fair and non-discriminatory way. The WT(C)R also provide that an employer can only require a worker not to take carried-over leave on particular days, where they have a “good reason” to do so.
Employers must also bear in mind that holiday continues to accrue for those on maternity leave and sick leave. Such leave must also be managed in a fair and non-discriminatory way.
Finally, employees’ physical and mental health must be balanced against operational requirements. The wellbeing of staff is not a matter that can be compromised or otherwise deferred to a later date.
Top Tips
In order to ensure that your business has the tools to manage holiday effectively, we recommend that employers:
- review staff holiday records to establish how much leave remains untaken;
- encourage staff to take their remaining holiday, if possible, before the end of the leave year;
- record reasons for refusing carried-over leave requests (to show your “good reason”);
- update holiday policies to:
- include principles for dealing with conflicting holiday requests consistently;
- update any restrictions on the amount of holiday that can be booked at one time;
- explain the types of circumstances when holiday may be refused; and
- ensure staff are aware of the temporary carry over provisions.
- contracts may be updated to:
- allow shorter notice to be given to take/not take holiday;
- prevent contractual holiday accruing during furlough; and
- provide a right to require staff to take remaining holiday during their notice periods.
If you need advice or assistance with any of the above, please contact Vanessa Bell on 07551 153484 or vbell@prettys.co.uk.
