New guidance on holiday entitlement and pay during the coronavirus pandemic

The Government has published guidance on how holiday entitlement and pay operate during the coronavirus pandemic. While much of the guidance reflects the earlier Acas guidance, this guidance is more detailed. Employers will welcome the restrictive approach it takes to when it might not be reasonably practicable, due to coronavirus, for a worker to take their holiday in the current leave year, which entitles them to carry it over into the two subsequent leave years. 

The guidance confirms: 

• Furloughed workers continue to accrue statutory and contractual holiday entitlement
• Furloughed workers can take holiday without disrupting their furlough 
• Employers can require workers to take (or not to take) statutory holiday while furloughed and the usual notice provisions apply. Employers should engage with furloughed workers and explain reasons for wanting them to take leave before requiring them take it. They should also 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 (the fundamental purpose of holiday).
• Where a furloughed worker would normally have a bank holiday off as holiday:
  • the worker and employer can agree that the worker will take it as holiday or
  • the employer can require the worker to take it as holiday, using the normal notice provisions and
  • in either case, the employer must pay the employee the correct holiday pay (see below) or
  • the employer and worker can agree that the bank holiday will not be taken as holiday at that time and defer taking it until a later date 

Holiday pay

Holiday pay, whether the worker is on furlough or not, should be calculated in line with current legislation, based on a worker’s usual earnings. The underlying principle is that a worker should not be financially worse off through taking holiday. Where a worker has regular hours and pay, their holiday pay would be calculated based on these hours. If they have variable hours or pay, their holiday pay is calculated as an average of the previous 52-weeks of remuneration excluding weeks in which there was no remuneration.
Where a furloughed worker takes holiday, the employer can continue to claim the 80% grant (capped at £2,500 per month) under the Coronavirus Job Retention Scheme but will have to fund the additional cost itself. 

Carrying over untaken leave

Carry over rules

The 5.6 weeks’ statutory holiday is split into 4 weeks (basic entitlement) and 1.6 weeks (additional entitlement). The additional entitlement can be carried forward into the following leave year if a written agreement exists between the worker and the employer. Generally, the basic entitlement cannot be carried into future leave years, so employers must facilitate these weeks being taken in the current leave year.

However, under government passed emergency legislation which enables workers to carry holiday forward untaken leave out of the basic entitlement where the impact of coronavirus means that it has not been reasonably practicable to take it in the leave year to which it relates. They can carry it forward into the following two leave years. 

When calculating how much holiday a worker can carry forwards, employers must give workers the opportunity to take any leave that they cannot carry forward before the end of the leave year.

Is it reasonably practicable to take holiday? 

When considering whether it was not reasonably practicable for a worker to take leave as a result of the coronavirus, an employer should consider various factors, such as:

• 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 which cannot be met through alternative practical measures)
• The extent to which the business’s 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 they need to take a period of rest and relaxation
• The length of time remaining in the worker’s leave year, to enable the worker to take holiday later in 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
• The ability of the remainder of the available workforce to provide cover for the worker going on leave

Employers should do everything reasonably practicable to ensure that the worker is able to take as much of their leave as possible in the year to which it relates, and where leave is carried forward, it is best practice to give workers the opportunity to take holiday at the earliest practicable opportunity.

The guidance says furloughed workers are unlikely to need to carry forward statutory annual leave, as in most cases they will be able to take it while furloughed. However, if, due to the impact of coronavirus on operations, the employer is unable to fund the difference between the grant received and the correct amount of holiday pay, it is likely that this would make it not reasonably practicable for the worker to take their leave, enabling the worker to carry their annual leave forwards. In this situation, the worker must still be given the opportunity to take their annual leave, at the correct holiday pay, before the carried over annual leave is lost at the end of the next 2 leave years.

To ensure that workers do not lose holiday entitlement, it is best practice for employers to inform workers of both the need to carry forward, and how much leave will be carried forward.

Pay in lieu

Carried over leave is still subject to the usual rules around payment in lieu. An employer must facilitate the worker taking their annual leave and not replace it with a financial payment.  

However, if the worker leaves employment, the employer must pay the worker for any untaken leave. This will include the carried leave under the coronavirus exemption, along with any leave that the worker has accrued in the relevant leave year. 

What are the usual notice provisions? 

Employers can require workers to take holiday and cancel a worker’s holiday, if they give enough notice to the worker. 

The required notice periods are:

• Double the length of the holiday if the employer wishes to require a worker to take holiday on particular days
• The length of the planned holiday, if the employer wishes to cancel a worker’s holiday or require the worker not to take holiday on particular dates

For example, if an employer wanted to prevent a worker taking a week’s holiday, they would have to give notice earlier than 1 week before the first day of the holiday. For the purposes of calculating the notice period, any uninterrupted period of holiday counts as a single period. 

These rules on notice periods can be altered by a binding written agreement between the employer and the worker.