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Holiday entitlement and pay during the COVID-19 pandemic

Holiday entitlement and pay during the COVID-19 pandemic

14th May 2020 - Published by Kuits employment team

Yesterday (13th May 2020), the Department for Business, Energy & Industrial Strategy released guidance on how holiday entitlement and pay should operate during the COVID-19 pandemic. Here, the Kuits employment team summarises the key points.

Holiday Entitlement

The guidance confirms that furloughed workers continue to accrue statutory holiday (being 5.6 weeks for full-time workers) whilst on furlough and that any holiday they take does not disrupt their period of furlough.

Taking Holiday

The guidance also confirms that, as expected, an employer can require a worker to take holiday whilst on furlough so long as the correct notification under the Working Time Regulations is given (that being double the length of the holiday the employer wishes the employee to take).

However, there is a cautionary note in the guidance that states that employers should consider whether any restrictions the worker is under, such as the need to socially distance or self-isolate, would prevent the worker from resting, relaxing and enjoying leisure time. This is considered to be the fundamental purpose of holiday. Employers are not permitted to require furloughed workers to take annual leave where they are ill and incapable of resting and relaxing.

Employers can cancel pre-arranged worker holidays whilst on furlough, so long as appropriate notice is given (in this case being no less notice than the length of the planned holiday).

Bank Holidays

Employer obligations with regards to bank holidays have also been clarified:

  1. Where a bank holiday falls inside a worker’s period of furlough and the worker would have usually worked the bank holiday, their furlough will be unaffected by the bank holiday and this will be treated as a normal day for which the worker is furloughed.
  2. If the employee usually takes the bank holiday as annual leave then either:
    1. the employer must pay the correct holiday pay for the worker for that bank holiday; or
    2. the holiday is deferred until a later date (at which time the worker should still receive their full holiday entitlement).

Holiday Pay

As expected, holiday pay should be calculated based on the employees normal rate of pay, not the 80% pay they may be receiving whilst on furlough. This will require employers to top up the difference, as HMRC will only cover the cost of 80% of holiday pay (subject to the £2,500 monthly cap). This does however mean that HMRC will fund most of the cost of an employee’s annual leave entitlement whilst on furlough, something which will no doubt be attractive to employers.

Carrying Over Annual Leave

As previously announced by the government, where it is not reasonably practicable for a worker to take their holiday entitlement (in this case being the four-week holiday granted under EU Law) due to the effects of coronavirus, the untaken amount may be carried forward into the subsequent two leave years. The carryover of holiday, however, is not an automatic right, and only applies where it was not reasonably practicable for the worker to take their holiday in the leave year it was accrued.

Factors as to practicability are:

  • Whether the business has faced increased demand, which prevented the taking of holidays;
  • Business interruption that prevented temporary cover to allow the taking of holiday;
  • The health of the worker and how soon they need to take a period of rest and relaxation;
  • How long is left in the holiday leave year, which may allow leave to be taken at a later date; and
  • Whether the worker taking leave would impact on the wider response and recovery from coronavirus.

Interestingly, the guidance does not envisage that furloughed workers will need to carry forward any statutory annual leave, as it can be taken during a period of furlough leave. The only reason it sees is where an employer cannot afford to pay holiday pay (or the 20% top in pay) and this could be a legitimate reason to allow holiday to carry over holiday years.

Any holiday that is carried over into subsequent years should be used first and before leave accrued in those subsequent years. This carried over leave is also subject to further protections in that the guidance states that employers must have a “good reason” to reject any requested carried over holiday.  The term “good reason” is not further defined, although this appears to mark a slight departure from rejecting normal annual leave requests. On the basis that there is usually a business reason to reject a holiday request (such as a lack of cover), it may be that this change has little practical effect.

If an employee leaves employment before they use their accrued and carried over holiday, they must be paid for this untaken leave as with normal accrued but untaken holiday.

Get in touch with an employment lawyer in Manchester

Our experienced advisors are already talking to employers about the issues above. If you require any advice please call Kevin McKenna on 0161 838 7851 or email kevinmckenna@kuits.com.

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