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Government issues guidance on holiday rights and pay during the coronavirus pandemic

29th June 2020
We are coming up to the main holiday period in the year. However, this year is rather different.

With many employees on furlough leave, and many others working from home. Taking holiday in this time is going to be a rather odd experience for both employers and employees. We have had many questions from employers about how to deal with the holiday entitlements of their staff at this time. A number of common issues and questions arise:-

What happens to holiday that they have already booked, but look like they will fall within the period of furlough leave?

Is it possible to take holiday in furlough leave?

Can the employer require staff to take holiday in a furlough period?

What happens to holiday entitlement in the furlough period- does it continue to accrue?

What happens if the individual has not taken all their holiday entitlement in the current holiday year?  

What does the business have to pay their staff for any holiday taken during the furlough period?

How does working from home affect holiday entitlement?

In an effort to address and answer some of these questions, the Government has recently issued guidance on taking holidays during the current coronavirus pandemic. The Guidance seeks to set out the position both of workers who have continued to work throughout the crisis and those that have been placed on furlough leave.

At this point we give a big health warning. The Guidance makes it clear that it is only guidance, and should not treated as legal advice. We are also well aware that legal opinion on this topic is split, with some distinguished employment lawyers expressing the view that holiday can be taken during the furlough period, and others taking the contrary view. Do also remember that Government guidance has sometimes been ruled to be incorrect when considered by the courts and tribunals (sometimes spectacularly- think of the Tribunal fees at this point).

Firstly, workers will continue accrue their normal holiday entitlement while they are on furlough leave. In addition, workers that are required to work from home instead of their usual place of work during the current health crisis also continue to accrue their holiday entitlement as normal.  

As you may already be aware of, the Government issued amendments to the Working Time Regulations recently, which enable untaken holiday to be carried over the next two “holiday years.” The Guidance states that:-

“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.” To be precise, the regulations deal with the situation of where it is “not reasonably practicable” to take holiday in the year to which it relates, due to the impact of coronavirus. The regulations go on to state that in such circumstances the holiday entitlement (up to 4 weeks worth) which has not been taken may be carried forward into the following two holiday years.

The guidance sets out a number of examples of issues and factors that an employer might consider in determining if it is “reasonably practicable” for a worker to take holiday. Rather oddly, the first factor raised in the guidance considers the scenario where the employer has had a “significant increase in demand due to coronavirus”- a relatively unusual situation we must say, in light of our general observations and enquiries from business clients we have received! Subsequent factors listed include some which are more generally applicable, such as:-

“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,” and,

“the ability of the remainder of the available workforce to provide cover for the worker going on leave.”

The general point made on the timing of holiday is that 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 it is carried forward, it is best practice to give workers the opportunity to take holiday at the earliest practicable opportunity.”

On the topic of employees on furlough leave the Guidance states that they are “unlikely to need to carry forward annual leave.” The guidance gives the reason for this conclusion as “they will be able to take it [annual leave] during the furlough period…” This is quite controversial, as as not legal commentators would agree with that statement (we will come back to this below). The Guidance then makes it clear that if a worker takes holiday during the furlough period, that they should receive their normal full rate of pay (even if they have already agreed to accept 80% of their normal pay (subject to a cap of £2,500 per month) in the furlough leave period). This point is generally agreed by most legal commentators. Clearly paying the additional 20% for the holiday period may be a problem for a business that is not getting any income, or only a very reduced income. In that situation the Guidance indicates that the inability to fund the difference is likely to mean that it is not reasonably practicable for the worker to take their leave, enabling the worker to carry their annual leave forward. It is important to note here that the Guidance makes it clear that the worker must still be given the opportunity to take their annual leave at the correct holiday pay before the annual leave is lost.

An important point to note about carrying forward holiday entitlement into successive holiday years is that in this situation the worker will accrue holiday in each new year as normal, and will be entitled to that holiday plus the holiday that has been carried over from the previous holiday year(s). It is generally best to allow the individual worker to take the holiday from the entitlement that expires first, ie that which has been carried over from the earliest holiday year first. The rules on holiday entitlement do not allow for accrued untaken holiday entitlement to be paid off instead, apart from at the termination of employment (when the worker will be entitled to be paid in respect of all accrued untaken holiday- including any amount that has been carried over from an earlier holiday year).

The Guidance states that “workers on furlough can take holiday without disrupting their furlough.” It goes on to indicate that the normal rules relating to an employer requiring a worker to take leave continue as normal (ie enabling employers to require workers to take holiday by giving them advance notice to do so). The amount of advance notice that an employer is obliged to give a worker to require them to take holiday can be agreed in a written agreement, but under the Working Time Regulations if no specific terms of agreement have been made on this topic (the Regulations set out the default position obliging the employer to give at least a certain amount of minimum notice to take holiday). The minimum required advance notice for an employer to require an employer to take holiday is twice the number of days that the employer wishes to require the worker to actually take as holiday. This is in advance of the first day of the holiday, and the notice must be given before the notice period itself starts.

The Guidance suggests that employers can require workers to take holiday during the period of furlough leave (even though this begs the question on what you on annual leave from when you have been on furlough leave up to them- ie from another type of leave!)

The Guidance does, importantly note that in requiring workers to take holiday, they must 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.” The Guidance therefore does not give a clear view on whether holiday taken during furlough meets the definition of annual leave set out under the current EU case law (which, by the way still applies in the UK), which emphasises that such leave must enable the worker to rest and enjoy a period of relaxation and leisure. As a consequence of an analysis of the case law, a number of legal commentators have concluded that workers cannot effectively take annual leave in a furlough period while they are not in reality free to enjoy it as they might normally wish to do. We think it is likely that many workers will simply see no point in taking holiday while they are not able to go away, (perhaps to a holiday they had booked abroad) and cannot genuinely spend the holiday time fully doing something that they want to do or go where they want to go because of the current restrictions (ie travel restrictions, reduced and cancelled flights, closing of hotels, closing of B&Bs, closing of restuarants, pubs, cancelling of concerts, festivals etc). Most people we speak to do not consider the main aspect of holiday as “rest” per se. It is rest from work, and doing what they want and going where they want in that time which makes it a holiday.

The inevitable problems for employers over holiday at the current time are obvious:-

Cost to consider (ie topping up to 100% of normal pay) when the business income is likely to have dropped,

Staff that will want to cancel (or financially need to cancel) booked holidays this summer, as they do not know when they will able to do the things or go to the places that they had booked (including flights and hotel accommodation etc),

Lots of holiday entitlement will accrue- meaning it will build up to be taken in an ever- shorter period of the year left to take it,

Not yet knowing what level of business will be running, and hence not knowing how many of staff will be needed at work in the coming weeks/months, with the resulting uncertainty of ability to accommodate holiday requests.

While it remains a risk (as the Guidance may prove to be incorrect) the cheaper option for businesses may well be to give the necessary advance notice to staff to take holiday during the current furlough period (thereby saving an immediate financial liability for 80% of the pay and having only to top-up the pay to the worker’s normal rate of pay for the holiday period in question). This would enable the business to send people on holiday at a time when business is slow, or effectively suspended, it would also mean that future planning and co-ordinating of staff holidays will be easier- by reducing the problems caused by the accrual of holiday, and the potential need to carry over holiday entitlement into the next holiday year. As stated earlier, there is no guarantee that the  courts and Tribunals will agree with the Government’s views as set out in the Guidance, but with the main holiday season fast approaching, and many flights remaining cancelled, and hotels closed, employers need to give this issue their attention very shortly if they are to reduce the complications that this issue is likely to bring.   

If you need any further advice on any matter raised in this article do not hesitate to contact us at Hallett Employment Law Services Ltd.

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