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“Helpful, but more guidance needed”: Rules relaxed for carrying over annual leave

Howes Percival comments on latest coronavirus impacts

An amendment has been made to the Working Time Regulations allowing workers to carry over some of their statutory annual leave entitlement into the next two years, where it is not reasonably practicable for them to take holiday due to coronavirus.

Typically, the statutory 4 weeks’ leave a worker is entitled to under EU law can only be taken in the year the worker was entitled to it, with exceptions in relation to sickness or maternity leave. Any leftover entitlement cannot be given as a payment in lieu unless the employment is terminated, meaning unused leave is lost.

There is also an obligation on employers to ensure their workers take their statutory entitlement in each leave year and failure to do so could result in a financial penalty.

The rules have now been relaxed and where it is not reasonably practicable for a worker to take some, or all, of their statutory entitlement as a result of effects of coronavirus (including on the worker, the employer or the wider economy or society) they have a right to carry over their unused leave into the following next 2 leave years.

The amendment only relates to the statutory 4 weeks’ annual leave workers are entitled to under EU law. It does not apply to the additional 1.6 weeks of annual leave entitlement UK workers receive, which is already subject to a maximum one-year carry over period if agreed between the employer and worker.

Employers will only be able to require a worker not to take carried-over leave on particular days where they have a “good reason” to do so. However, what constitutes a “good reason” has not been defined.

Whilst this amendment is helpful in relation to holiday entitlement that cannot be used, the situation is less clear in relation to holiday that has already been booked, particularly in relation to furloughed employees. The current government guidance on the Coronavirus Job Retention Scheme states employee rights are not affected by being on furlough leave, suggesting holiday entitlement would continue to accrue as normal. However, the guidance is silent on whether holiday can be taken during a period of furlough leave and if so, what rate of pay the employee is entitled to receive whilst on holiday: their normal salary or the 80% furloughed rate. The situation is fast-moving and we may receive further information from the government clarifying the position. 

Partner and employment law expert, Simon deMaid comments, “Allowing worker’s unused holiday to be carried over into the next two leave years will allow businesses already under pressure from the impacts of coronavirus the flexibility to better manage their workforce, whilst still protecting workers’ right to paid holiday.

“The biggest difficulty for employers will be determining how to designate what is statutory leave and what can be carried over from one leave year to the next. Designating any leave already taken as ‘statutory leave’ instead of ‘additional leave’ could result in workers losing that leave. Where leave is taken into another leave year, employers may wish to give clear guidance or in some cases instruction in respect of when that leave can be taken. More importantly for employers is the need for clarification of whether leave can be taken or be required to be taken by employees during a period of furlough and the appropriate pay for that holiday.”

For more information on Howes Percival’s employment law team visit: https://www.howespercival.com/services/employment-and-hr/

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For further information please contact:

Gordon or Liz at MAW Communications on 01603 505 845

Notes to editors:

Howes Percival has offices in Cambridge, Leicester, Manchester, Milton Keynes, Northampton and Norwich.  It has 50 partners and 169 lawyers in total.

The firm is recommended in The Legal 500 – the authoritative guide to the UK’s leading law firms.  In the 2020 guide, no fewer than 12 different departments achieved the guide’s highest possible ranking (Tier 1): Corporate and Commercial; Dispute Resolution – Commercial Litigation; Dispute Resolution – Debt Recovery; Finance – Insolvency and Corporate Recovery; Human Resources – Employment Law; Human Resources – Health and Safety; Private Client – Agriculture and Estates; Private Client – Tax, Trusts and Probate; Real Estate – Commercial Property; Real Estate – Property litigation; Real Estate – Environment & Planning; Technology, Media & Telecoms – Intellectual Property.