21 May 2020
An explanation of how holiday entitlement and pay operate during the coronavirus pandemic, where it differs from the standard holiday entitlement and pay guidance. This issue is starting to come up more now as employers and employees get to grips with a return to work and thoughts turn to the future working arrangements.
The guidance below seems to cover most eventualities but if you have any queries please contact us.
Perhaps the most important confirmation is that holidays will not break the furlough period and employers can still recover 80% of the cost, under the current scheme to end of July at least. From August onwards it is expected that the employer will have to pick up more of the bill but details of the change are yet to be announced.
Presumably the 80% recovery will be based on the furlough rate rather than the actual holiday pay paid which may well be different and hopefully this will be clarified in due course.
- Holiday entitlement
- Taking holiday
- Holiday pay
- Carrying annual leave into future leave years
- Furloughed agency workers
- More information
This guidance outlines how holiday entitlement and pay operate during the coronavirus pandemic. It is designed to help employers understand their legal obligations, in terms of workers who:
This guidance should not be treated as legal advice. Employers and workers should always check individual contracts and if necessary seek independent legal advice.
Almost all workers, including zero-hour contracted workers and those on irregular hours contracts, are legally entitled to 5.6 weeks’ paid holiday per year. The exception is those who are genuinely self-employed.
For the purposes of calculating holiday entitlement, the statutory 5.6 weeks entitlement is split into 4 weeks derived from EU law, and an additional 1.6 weeks from UK law. This guidance focuses on the legal minimum entitlement of 5.6 weeks. Many workers have contracts that entitle them to additional paid holiday beyond this, known as contractual holiday entitlement. Workers and employers can agree to alter the terms of the worker’s contract, providing it does not go below the statutory minimum of 5.6 weeks.
A worker has the same holiday entitlement, regardless of whether they are on sick leave, maternity leave, parental leave and adoption leave, and other types of statutory leave. A worker may request holiday at the same time they are on sick leave but cannot be required to take it while off sick.
Workers who have been placed on furlough continue to accrue statutory holiday entitlements, and any additional holiday provided for under their employment contract. Use the government holiday entitlement calculator to calculate a worker’s statutory holiday entitlement.
- require workers to take holiday
- 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
Employers can ask workers to take or cancel holiday with less notice but need the workers’ agreement to do so.
These notice periods are in advance of the first day of the holiday, and the notice must be given before the notice period starts. 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.
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. Employers should engage with their workforce and explain reasons for wanting them to take leave before requiring them to do so.
If an employer requires a worker to take holiday while 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.
There is no statutory right to time off for bank holidays. Employers can include bank holidays as part of a workers’ statutory holiday entitlement if they choose, but do not have to do so.
Where necessary, employers can require workers who would usually take bank holidays as holiday to work instead, using the standard notice periods. Employers must still ensure that the workers receive their statutory holiday entitlement for the year.
A worker who would usually receive bank holidays as part of their statutory holiday entitlement is required by their employer to work on the 8 May 2020, a bank holiday. The worker’s employer is then required to give the worker an additional day of annual leave later in the leave year, to ensure that the worker does not fall below the statutory minimum for the year.
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.
However, if the worker would usually have had the bank holiday as annual leave, there are 2 options.
The bank holiday is taken as annual leave
If the employer and the worker agree that the bank holiday can be taken as annual leave while on furlough, the employer must pay the correct holiday pay for the worker. Employers may also require workers to take the bank holiday as annual leave with the correct notice periods.
The bank holiday is deferred
If the employer and the worker agree that the bank holiday will not be taken as annual leave at that time, the worker must still receive the day of annual leave that they would have received. This holiday can be deferred till a later date, but the worker should still receive their full holiday entitlement.
The amount of pay that a worker receives for the holiday they take depends on the number of hours they work and how they are paid for those hours. The principle is that pay received by a worker while they are on holiday should reflect what they would have earned if they had been at work and working.
Holiday pay, whether the worker is on furlough or not, should be calculated in line with current legislation - see the standard guidance, 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.
An employer should not automatically pay a worker on holiday the rate of pay that they are receiving while on furlough, unless the employer has agreed to not reduce the worker’s pay while on furlough.
If a worker on furlough takes annual leave, an employer must calculate and pay the correct holiday pay in accordance with current legislation - see the standard guidance. Where this calculated rate is above the pay the worker receives while on furlough, the employer must pay the difference. However, as taking holiday does not break the furlough period, the employer can continue to claim the 80% grant from the government to cover most of the cost of holiday pay.
Carrying annual leave into future leave years.
The 5.6 weeks of statutory holiday is split into 4 weeks and 1.6 weeks, and there are some differences in the rules that apply:
- the 1.6 weeks can be carried forward into the following leave year if a written agreement exists between the worker and the employer
- generally, the 4 weeks cannot be carried into future leave years, so employers must facilitate these weeks being taken within the relevant leave year
However under certain circumstances employers must allow the 4 weeks to be carried into future leave years. Where a worker cannot take annual leave due to them being on maternity leave or sick, employers must still allow workers to carry their annual leave forwards. These rights remain unaffected by a worker being furloughed.
Carrying leave forwards: how new legislation has changed the rules
The government has passed new emergency legislation to ensure businesses have the flexibility they need to respond to the coronavirus pandemic and to protect workers from losing their statutory holiday entitlement (The Working Time (Coronavirus) (Amendment) Regulations 2020, laid before Parliament on 27 March 2020). These regulations enable workers to carry holiday forward where the impact of coronavirus means that 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 4 weeks’ holiday due to the effects of coronavirus, the untaken amount may be carried forward into the following 2 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.
What is reasonably practicable?
When considering whether it was not reasonably practicable for a worker to take leave as a result of the coronavirus, so that they may carry untaken holiday into future leave years, 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 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 practicable opportunity.
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 (in most cases at least - see Taking holiday on assessing whether a furloughed worker can take holiday). 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 - see Holiday pay.
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.
Examples of what may be reasonably practicable.
A worker has 2 weeks of holiday left under regulation 13, and their leave year expires in 2 months. Owing to the coronavirus, a significant proportion of the employer’s workforce is unable to work during those 2 months. The employer assesses what steps it could reasonably take to manage the 2-month period, and this assessment shows that it is not reasonably practicable for the worker to take both weeks of holiday in what is left of the worker’s leave year. They agree that the worker will take one week in the remaining part of the leave year, and that the other week will be carried forwards to be taken as early as possible in the following leave year, when the situation allows.
A worker has just started a new leave year, and as such has their full leave entitlement to take over the next 12 months. Their employer experiences a significant short-term increase in demand that is anticipated to last for 3 months.
The employer agrees with the worker that while it will not be practicable to take holiday in the 3 months where demand has increased, it will be possible for the worker to utilise their full entitlement in the rest of the leave year, so there is no need to carry holiday forwards.
Handling leave that has been carried forward.
When a worker carries leave forwards due to the coronavirus, they will continue to accrue holiday in the next leave year. As such, they will have 2 entitlements:
- the holiday that has been carried forward that must be taken in the next 2 leave years
- the entitlement that relates to the new leave year
Holiday pay for leave carried forward should be calculated in the same way as set out in Holiday pay.
Owing to the coronavirus, a worker carries 2 weeks forward into their next leave year. In that leave year they will have a total of 7.6 weeks of statutory holiday entitlement:
- the 2 weeks carried forward (‘carried holiday’)
- the 5.6 weeks to which they are entitled in the new leave year
When a worker with multiple entitlements takes holiday, it is generally best practice to allow the worker to take holiday from the entitlement that expires first. In practice, this means that workers should be allowed to take the holiday to which they are entitled in the new leave year before they take the ‘carried’ holiday, as the ‘carried holiday’ entitlement lasts for 2 years.
However, ‘carried holiday’ is subject to further protections – to be able to refuse to allow a worker to take “carried holiday” on particular dates, the employer must have good reason.
The employer may request that the worker takes “carried holiday” instead of their regular entitlement. If they do so, the employer must still ensure that the worker receives their full regular entitlement in the leave year to which it relates, in addition to any carried holiday taken.
Where carried leave is carried into a further leave year, the employer must facilitate the worker taking their leave in that later year.
Giving notice to workers
There is no statutory requirement to give workers notice that they will be able to carry holiday forward if they do not take it. However, it is unlawful for employers to prevent workers from taking holiday to which they are entitled.
To ensure that workers do not lose the holiday entitlement that they are entitled to, it is best practice for employers to inform workers of both the need to carry forward, and how much leave will be carried.
Requiring workers to take annual leave
An employer’s ability to require a worker to take annual leave is unaffected by the ability to carry holiday into future leave years. Where it is reasonably practicable for a worker to take annual leave, employers should facilitate this.
Generally, employers remain able to require workers to take annual leave to ensure that holiday is taken in the leave year to which it relates. This is covered in more detail in Holiday pay.
Payment in lieu for carried leave
Carried 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 (known as payment in lieu).
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. The payment in respect of such untaken leave is based on a statutory formula set out in regulation 14 of the Working Time Regulations.
Furloughed agency workers
The CJRS does not alter the position as to whether or not agency workers, including those working through an umbrella company, are entitled to accrue holiday under the Working Time Regulations and / or under their contract.
Accrual of holiday during furlough
Where holiday rights exist under the regulations, they remain unchanged when workers are on furlough. Where agency workers are engaged under a contract of employment which sets out their entitlement to holiday, that is 5.6 weeks or more in accordance with the regulations, their contract will continue to operate as before and they will continue to accrue holiday on furlough as they would normally when between or otherwise not working on assignments.
Some agency workers on a contract for services may not be entitled to the accrual of holiday or to take holiday under the Working Time Regulations while on furlough because they are not workers or treated as workers under those regulations when between assignments or otherwise not working on assignments. Contracts may nevertheless include holiday provisions which will continue to operate in the same way as they did prior to the furlough period.
Taking holiday leave and receiving holiday pay during furlough
Agency workers who have worker status can take holiday they are entitled to under the regulations or their contract of employment while on furlough. Where a furloughed agency worker takes holiday, the employer who has placed the agency worker on to furlough may continue to claim the grant from HMRC. The grant can cover up to 80% of the worker’s wage cost, with the employer liable for holiday pay above this figure.
Employers have the flexibility to control when a worker is able to take leave, through the notice periods covered in Taking holiday. This is the same for agency workers, and employment businesses may refuse a worker to take leave provided this is permitted by the Working Time Regulations and the agency worker’s contract.
Agency workers may be able to carry holiday into future leave years as covered in the next section.
You can contact the Advisory, Conciliation and Arbitration Service (Acas) if you have further questions.
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