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Managing employee holiday entitlement during COVID-19

COVID-19 will continue to cause difficulty for employers even when the worst effects of the pandemic have passed.

One of the big interventions by the government has been to allow untaken statutory holiday to be carried over for two years to prevent key industries, such as food and healthcare, from becoming short-staffed. It will be hard for many of them to take holiday at present, so they are being allowed to carry it over.

Because the change has been made as an amendment to the Working Time Regulations, it will affect every employer, including those who have more staff than they need rather than less.

It allows employees to carry over up to four weeks of holiday where it is not reasonably practicable for them to take it during the current leave year because of coronavirus.

It might be possible for an employer to refuse carryover if it can argue that the reason for not taking holiday had nothing to do with coronavirus.

Not all holiday can be carried over and the changes do not apply to Bank Holidays or additional contractual holidays given by some employers.

It is already problematic for employers if employees do not take holiday during lockdown. Businesses will still have to pay employees, through the furlough scheme or otherwise, and this is at a time when many of them have little income.

As time moves on, with the prospect of the economic climate improving, giving opportunities to generate new business and pay off debt, the recovery process might be slowed if employees choose to take annual leave just when they are needed most. Many employers would prefer employees to take holiday now.

Employers have been cautious about holiday for furloughed employees because of worries that holiday would break the furlough period, but the government has now clarified several outstanding issues.

Employees can take holiday while on furlough without breaking furlough. Bank Holidays, and holidays that employees have already booked for the furlough period, do not have to be cancelled. Employers are not obliged to offer any days in lieu of this holiday.

Employers are normally permitted to require their employees to take holiday during a period of downturn, so long as the notice given is twice the length of the holiday to be taken. Sick employees cannot be required to take holiday and there is debate as to whether furloughed employees can be forced to take it, and about the amount of holiday that can be imposed.

In practice, many employers will be willing to take the risk. The Working Time Regulations limit employers’ freedom to require employees to take holiday, but these provisions do not seem to be directly enforceable.

From an industrial relations point of view, it might be better to seek agreement from employees to use up some of their holiday. Employees are often as keen as employers to avoid redundancies, and agreement from employees will make it even more difficult for anybody to challenge holiday taken during furlough, or to claim carryover.

Even if employees have agreed for employers not to top up the 80% of pay available under the furlough scheme, employers will still be toping up for any days taken as holiday.

For employees who are worried about their income, that fact that they are better off taking holiday is an incentive for them to agree to an employer’s request. This issue is going to become more pronounced the longer employers take to decide on a strategy for dealing with it.

James Medhurst is a senior associate in the Employment Law team at Royds Withy King.