How to handle annual leave during lockdown

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Employees will not be jetting off to sunnier climes soon, so how can HR handle annual leave allowances?

With no real clarity as to when businesses can fully open again or how long lockdown measures will last, it can be challenging to plan employees’ annual leave. Amy Ling looks at employers’ obligations regarding holiday and what they can and can’t ask employees to do.

Although it has only been a few weeks since lockdown was announced, hopping on a plane for a week by the beach now feels a lifetime away. With some employees now working flat out to keep essential services going whilst others are stuck at home on furlough, how should annual leave be dealt with in a time of coronavirus?

What are an employer’s obligations?

Workers are entitled to a paid annual leave of 5.6 weeks per year. This is made up of four weeks derived from the EU’s Working Time Directive (WTD leave) and 1.6 weeks provided under the UK’s Working Time Regulations 1998 (WTR).

Together, this works out at 28 days for a full-time employee. Many will also be entitled to additional holiday days under their contract of employment.

Employers have an obligation to ensure that, as a minimum, employees take their WTD leave each year. A failure to do so can create exposure to claims for compensation and/or a declaration they should be permitted to take holiday.

Usually, getting employees to take their holiday entitlement is not an issue. However, with so many employees now working from home and unable to travel or visit family, many are reluctant to consider annual leave. Others are unable to book holiday due to the need to continue to work to meet increased demand or provide essential services.

Should we encourage employees to take leave during lockdown?

As a matter of good practice, employees should be encouraged to take their leave proportionately through the leave year, including any period of lockdown.

The fundamental purpose of annual leave is a non-working period of rest and relaxation (rather than foreign travel). It’s important employees take regular breaks away from the demands of the email inbox, customers and targets for their wellbeing and health.

Employees should be prompted to book leave and reminded of the restorative value of simply taking the time to be ‘offline’, even if this doesn’t involve leaving the house.

Can employers dictate when leave is taken?

The WTR allows employers to compel employees to take holiday (unless their policies or employment contracts specify otherwise). To do so, an employer just needs to give notice of the requirement to take holiday which is twice the length of the holiday proposed, so four days’ notice for two days of leave.

Requiring employees to take leave is obviously a less desirable option than encouraging employees to take leave and should be exercised with caution. Employees are not likely to take kindly to being “forced” to take time off and careful messaging should be used to assure them of the benefits of holiday on their own wellbeing.

What about furloughed employees?

Unless agreed otherwise, furloughed employees are still entitled to take holiday and to receive their “usual holiday pay” for this time.

This means those receiving only 80% of their normal pay will typically be entitled to a top up of the additional 20%. When it comes to bank holidays, HMRC’s guidance states that if employees usually take these days as annual leave, they should receive a top-up or day in lieu.

Because employers of furloughed employees only need to fund the top-up rather than the whole holiday day, encouraging (or requiring) employees to take holiday during furlough can therefore be a cost-effective option for employers with sufficient cashflow.

Can we force employees to use up all their holiday during lockdown?

It may be tempting for some employers to compel employees to take all of their annual holiday entitlement during lockdown or furlough on the basis they can return to work in July/August ‘all hands on deck’.

However, this is a risky approach and should be avoided. Aside from a corrosive effect on goodwill and team morale, legal challenges are likely to result. There is even a risk in some circumstances that running down leave entirely could be a breach of the implied term of trust and confidence, giving rise to resignations and claims of constructive unfair dismissal.

It’s worth remembering leave can be managed in other ways. Many employers are asking employees to have taken, say, 40% of their annual holiday entitlement by the end of August (if they have a January to December holiday year).

In addition, there is no obligation on an employer to agree to holiday requests and it’s reasonable to refuse these where there are business needs to be met. If employees are unable to take all their holiday as a result, then they may be able to carry this over to the next holiday year.

What are the new rules on carrying over leave?

At the other end of the spectrum to furloughed employees are those who would want to take holiday but are unable to do so because of the demands created by the pandemic.

In recognition of this, new regulations came into force in March allowing the four weeks of WTD leave to be rolled over for up to two leave years. This is a departure from the usual position, which usually prohibits any roll over of WTD leave from year to year.

Although clearly aimed at those keeping the nation going in these difficult times, the regulations are not restricted just to ‘essential’ or ‘key’ workers.

Any employee will qualify for a roll over if they have been unable to take holiday as a result of the impact of the coronavirus either on them, their family, the wider economy or society.

For example, an employee may find they are not permitted to take holiday whilst furloughed, but upon their return to work business is so busy it’s not possible to take their entitlement before the end of the year.