What are your legal obligations in terms of holiday entitlement in the current climate?

We take a look at what your obligations are in terms of employee holiday entitlement and payment for those who either continue to work, are on sick leave or are furloughed.

Holiday pay

A worker should receive holiday pay when they are on holiday to reflect pay that they would have received had they been at work and working. The pay a worker receives will depend on how many hours they work, and how they are paid for those hours.

Holiday pay for those on furlough and also for those who aren’t, should be calculated in line with current legislation and based on a worker’s usual earnings. Where a worker has regular hours and pay, holiday pay is calculated on these hours but if they have variable hours or pay, then the holiday pay is calculated using an average of the previous 52-weeks’ worth of remuneration.

For furloughed employees taking annual leave, the employer must still calculate and pay holiday pay in accordance with legislation. If this is above the amount that employees receive whilst on furlough, then the employer must pay the difference but can continue to claim the 80% grant from the government to cover some of the cost of the holiday pay.

Workers on furlough can take holiday without disrupting their furlough. The notice requirements for their employer requiring a worker to take leave or to refuse a request for leave continue to apply.

If an employer requires a worker to take holiday whilst on furlough, the employer 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, which is the fundamental purpose of holiday.

Bank holidays

Workers are still entitled to the statutory holiday entitlement for the year, so employers need to consider this.

For workers on furlough, where a bank holiday falls within their period of furlough and the worker would have usually worked that bank holiday, their furlough is unaffected by it. If the worker would ordinarily have their bank holiday as annual leave, then there are two options:

• Bank holiday taken as annual leave

If the employer and worker agree that the bank holiday can be taken as annual leave while on furlough, the employer must pay the correct holiday pay.

• Bank holiday deferred

If the employer and worker agree that the bank holiday will not be taken as annual leave at that time, then the worker must still receive the day of annual leave that would have been received. The leave can be deferred to a later date, but the worker must still receive their full holiday entitlement.

Carrying annual leave forward

The 5.6 weeks of statutory holiday is split out into four weeks and 1.6 weeks and there are differences in the rules that apply.

• 1.6 weeks can be carried forward into the following leave year where there is a written agreement between the worker and the employer.

• four weeks, however, cannot be carried into future leave years so these weeks must be taken within the year.

In some scenarios, employers must allow the four weeks entitlement to be carried into future leave years, for example, if a worker cannot take annual leave as they are on maternity leave or off sick. These rights remain irrespective of whether a worker is furloughed or not.

The Working Time (Coronavirus) (Amendment) Regulation 2020

The government passed new emergency legislation meaning a worker can carry forward holiday where the impact of coronavirus means it has not been ‘reasonably practicable’ to take it in the leave year to which it relates. Where it has not been ‘reasonably practicable’ for the worker to take some or all of the four weeks’ holiday due to the effects of coronavirus, the untaken holiday can be carried forward into the following two years leave.

What is ‘reasonably practicable’?

When defining ‘reasonably practicable’ government guidance suggests an employer should consider:

• 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 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 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

• 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 opportunity.

Furloughed workers

Workers who are on furlough are unlikely to need to carry forward statutory annual leave, as they will be able to take it during the furlough period. However, to do so they must be paid the correct holiday pay which is likely to be higher than the rate of pay that will be covered by government grants, with the employer making up the difference.

If, due to the impact of coronavirus on operations, the employer is unable to fund the difference, 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 annual leave is lost at the end of the next 2 leave years.

Read the guidance here