Sun, Sand and Covid-19 – What to do with Holiday Entitlements

One of the many thorny issues employers are wrestling with just now is how to manage holiday entitlements, both during and after the lockdown period, and how holiday interacts with periods of furlough.

Now I am not an employment law expert, but I have had to look into the regulations for Dafferns’ purposes, so I thought I would share some of my insights to save our clients having to go on their own research journey. (Please do seek employment law/HR advice if needed).

Most businesses are going to fall into one of two camps:

  • They are providing an essential service to support the country during the pandemic, so can’t afford to have any employees taking holiday at the moment.
  • They are running at much reduced, or no, activity at the moment, but are anticipating being very busy in the latter half of the year, once lockdown measures have been eased.

Either way, this is creating a headache for the employer in terms of satisfying their statutory obligations towards holiday and ensuring sufficient resources are available at the right time.

What are the statutory obligations?

  • Under the Working Time Regulations, all full-time employees are entitled to a minimum of 28 days holiday, including bank holidays. Employers can require employees to work on bank holidays, as long as they give employees at least 28 days holiday to take during their annual holiday period.
  • Employers must give employees reasonable opportunity to take all of their holiday.
  • It is not possible to carry forward the ‘basic’ (20 days) holiday entitlement, but the ‘additional’ (8 days) entitlement can be carried forward if the employer’s rules allow it.
  • Employers are not allowed to make payment in lieu of statutory holiday, except on termination. This is to encourage a healthy work/life balance.

Note that these regulations do not apply to holiday entitlement given over and above the statutory minimum.  Employers are free to make their own rules concerning such holiday.

What has changed as a result of Covid-19?

It has been announced that, where it was ‘not reasonably practicable’ for a worker to take some or all of their basic leave as a result of the effects of Covid-19, they will be able to carry forward up to the whole 20 days of basic holiday entitlement to be taken in the following 2 leave years.

What does this really mean for employers?

Well businesses are still going to want their employees to take holiday during the lockdown if at all possible, but they won’t want to feel constrained by the obligation to ensure employees are given reasonable opportunity to take all of their holiday during the current leave period.  Hence, this will give employers the flexibility to require employees to work this year at times of peak resource requirement, without the concern that employees will have insufficient capacity to use their holiday entitlement.

It should enable the wheels of business to turn as effectively as possible, whilst ensuring employees are not disadvantaged when viewed over a 2 to 3 year period.

How does this impact on furloughed employees?

HMRC has very helpfully enhanced its guidance on the interaction of holidays and furlough leave.  Critically, it has been made clear that it is possible for an employee to take holiday whilst on furlough.  Thus, a period of holiday will not impact on the continuity of the furlough period, which is important when considering the 3 week minimum qualifying period for CJRS grant purposes.

The caveat to this is that, whilst on holiday, the furloughed employee must be paid at their full pay rate, so the employer will have to make up the extra 20% over and above the CJRS grant.

Bank holidays are slightly different. The statement made by HMRC is as follows:

“If an employee usually works bank holidays then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave, then the employer would either have to top up their usual holiday pay (to 100%) or give the employee a day of holiday in lieu.”

In conclusion

Clearly, for those businesses falling into the second camp described above, it would be attractive to ask employees to take as much holiday as possible during the lockdown period.  However, this must be tempered with ensuring the employer retains a happy and engaged workforce, so a fair balance needs to be struck. This will vary according to each employer’s individual circumstances, but it is important to keep in mind the health and wellbeing of both employees and the business as a whole.