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COVID-19 Employment: Update on employee holiday issues

  • Legal Development 9 April 2020 9 April 2020
  • UK & Europe

  • Employment

We look at some of the frequently asked questions that employers have about employee holiday during the COVID-19 pandemic. With holiday plans cancelled or postponed, many people will want to save their holiday until normality returns so that they can enjoy the trips they planned. But employers will be anxious to ensure that holidays are taken when the business is quiet, not when business is picking up, So how does the employer approach the holiday issue and what are the employer's rights during

COVID-19 Employment: Update on employee holiday issues

If an employee asks to cancel pre-booked holiday, do we have to agree?

One of the effects of COVID-19 has been the impact on everyone's ability to travel, and many people have seen their holiday plans cancelled or postponed. This has led to some employees asking to cancel holiday that they had already booked so they can use it at a later date.

Unless you have agreed otherwise (such as in the employee's contract of employment or a collective agreement) an employer does not have to agree to an employee's request to cancel previously booked holiday. If the employee wants to take leave on different dates, they must agree this with you in the usual way.

Given it is not clear when people will be able to travel freely again, there is a risk that allowing employees to cancel all of their planned holiday may mean that many employees end up with a lot of accrued holiday. This may well create operational difficulties for your business if everyone wants to take their stored up holiday at the same time, perhaps when your business is just getting back on its feet.

From a practical and business perspective, if you are seeing a downturn in your business you may prefer employees to take holiday while they are quieter. There is also a broader issue of the importance of workers being encouraged to take regular breaks from their work even during this time, including by taking holiday. These are all points for you to consider. You may wish to encourage employees to continue to take holiday during this time (subject to business needs permitting this), whilst being understanding about people's holiday plans changing due to the impact of COVID-19.

Can we require our employees to take holiday?

You have the right to tell employees when to take their holiday. You could, for example, decide to close for a week and tell everyone to use their holiday entitlement.

If you decide to do this, you must give your staff notice. The notice must be for twice as many days as the days you're asking them to take as holiday (unless the contract says something else). For example, if you want to close for 5 days, you should tell everyone at least 10 days before.

You should explain to employees clearly why you need to do this and try and resolve anyone's worries about how it will affect their holiday entitlement or plans.

There are additional issues to consider if you wish to require employees to take holiday during furlough leave. These are discussed in our Clyde Guide to UK Employment Issues and COVID-19 (Coronavirus).

What are the new rules about holiday carry over?

Workers who have not taken all of their holiday entitlement due to COVID-19 will now be able to carry some of it over into the next 2 leave years, under new measures introduced by the government.

These measures are mostly aimed at relieving pressure on organisations employing key workers who are faced with more work that needs to be done as a result of COVID-19, but they apply to all organisations. This means workers can postpone taking some of their holiday entitlement without losing out on it.

These measures mean that all employers affected by COVID-19 have the flexibility to allow workers to carry over leave, at a time when letting workers take all their holiday could leave them short-staffed. This is particularly the case as some employers are experiencing high levels of sickness absence combined with heavy workloads.

When do the new holiday carry over rules apply?

They apply to all businesses, and to the 4 weeks' basic holiday entitlement under the Working Time Regulations 1998, allowing employees to carry over up to 4 weeks’ holiday into the next two holiday years.

Currently, workers are entitled to a statutory minimum of 5.6 weeks holidays each year. For most full time employees who work a normal Monday to Friday week, this amounts to 28 days' holiday including bank holidays each year. Before this new measure was introduced, the first 4 weeks of this entitlement could not be carried between leave years, meaning workers could lose this holiday if they did not take it.

The new rules apply where at the end of the holiday year it has been “not reasonably practicable” for a worker to take some or all of this leave “as a result of the effects of coronavirus (including on the worker, the employer or the wider economy or society)”.

It is not clear what threshold must be met for it to be "not reasonably practicable" to take some or all of the holiday within the holiday year. The Acas: Coronavirus: advice for employers and employees suggests that, in their view, this could apply where a worker:

  • is self-isolating and too sick to take holiday before the end of their leave year
  • has been put on lay-off or furlough
  • has been required to continue working and could not take paid holiday.

The new rules also say that an employer can only require a worker not to take their carried over holiday on particular days where it has “good reason” to do so. Normally employers can prevent an employee from taking holiday on their requested dates by giving advance notice of at least as many days as the holiday that is being refused, e.g. 3 days’ notice to refuse 3 days' holiday. The need to have a good reason is an extra requirement for holiday that has been carried over due to COVID-19.

Holiday and furlough leave

There are a number of questions and uncertainties around holiday and furlough leave.

Does holiday entitlement accrue during furlough?

Yes it does, in our view. This is because employees are still employed while furloughed so their holiday entitlement should accrue in the usual way.

In order to reduce costs during these difficult times, some employers may consider asking their employees to agree that for the current holiday year, any enhanced contractual holiday beyond the statutory minimum of 5.6 weeks per year is reduced to reflect the fact that they have been on furlough, but employees will still be entitled to their statutory holiday entitlement. This may be difficult though in large workforces where some employees may already have exceeded their statutory entitlement for the current holiday year.

Can employees take holiday while on furlough?

Unfortunately, the guidance from the Government on holiday and furlough leave doesn’t say anything about whether employees can take holiday while they are on furlough leave. This leaves uncertainties for employers, particularly as there are four bank holidays coming up in April and May:

  • Does taking holiday "break" a period of furlough leave?

One area of uncertainty is around whether taking holiday "breaks" a period of furlough leave, and how holiday interacts with the minimum 3 week period of furlough leave.

Would any holiday taken be a gap in the furlough leave or would it re-set the period?  If, for example, the holiday is taken within the first 3 weeks of furlough, would it re-set the period and potentially jeopardise your claim for a grant covering the wages accrued prior to the holiday?  Or is time spent on holiday during furlough still counted as time on furlough so there is no break in the furlough leave? There is no clear answer to these questions at the moment.

Updated guidance from Acas (which is not binding) says that furloughed employees should be able to request and take holiday in the usual way. This suggests that it wouldn’t break the furlough period. Until the government clarifies the positon, we suggest you take advice on how to deal with this in practice.

  • What should we pay staff who take holiday during furlough?

If employees can take holiday while on furlough, what should they be paid? Is it their normal pay or their furlough pay, which may be the reduced rate of 80% of their pay subject to a cap of £2,500? This is a complex area and we suggest you take advice.

In terms of whether you can reclaim holiday pay paid out to employees during furlough, the updated HMRC guidance does not explicitly say that you can claim for holiday pay under the furlough scheme and so the position on whether you do can so is unclear. Even if you can claim for holiday pay under the scheme, it would be limited to the amounts covered by the grant (i.e. it would be subject to the caps that apply).

If you have any questions or would like advice on these issues, please get in touch with your usual Clyde & Co contact.

For more Coronavirus (Covid-19) information please see our Coronavirus hub here.

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