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Carry on Carrying over Holiday Entitlement?

What should be your approach to carrying over holiday entitlement now, as we seem to be emerging from the worst of the pandemic? How should employers handle leave ‘carry over’ requests from their workers when what was a public health emergency is being replaced by the prospect of much tougher financial circumstances. A trading environment that may require ‘all hands to the pump’ for longer than usual as much as Covid ever did?

Maintaining (or better yet improving) productivity while ensuring that your workforce is committed and content and keeping within the law will require sound professional advice and good judgement for many businesses. It could be a matter of survival for many smaller companies.

The old rules on the ‘carry over’ of annual leave

The Working Time Regulations 1998 set out that all workers (including employees) are entitled to a minimum of 5.6 weeks of paid annual leave. Under the law of England and Wales (other jurisdictions may differ) employers are obliged to allow their workers to take leave within each ‘leave year’, unless they could not do so because of sickness or statutory leave such as maternity leave. In those circumstances, leave was to be carried over to the next leave year. The 2018 Supreme Court Pimlico Plumbers judgement also confirmed that the same holiday entitlement and pay rights apply to those supposedly ‘self-employed’ in the gig economy who are legally ‘workers’.

Rule changes in response to Covid-19

In March 2020, the government passed emergency legislation aimed at allowing businesses the flexibility to respond to the pandemic while also safeguarding statutory holiday entitlement rights. The Working Time (Coronavirus)(Amendment) Regulations 2020 allowed workers to carry holiday forward because it was not ‘reasonably practicable’ to take it in the leave year to which it related due to Covid. In those circumstances, the untaken amount of leave could be carried forward into the following two leave years.

This would apply to employees who were ill, self-isolating or were ‘frontline’ staff or key workers asked to continue working, but workers who cancelled holidays because of travel restrictions would not covered by the amended regulations – they could still have taken a break from work.

What are the rules now?

It seems logical for employers to assume that, since the maximum carry over provision in the March 2020 legislation was two years, these emergency Covid-inspired rules ceased to apply in March 2022, but that is not the case. There was no ‘expiry date’ given in the amended regulations. The right to carry over leave for two years appears to be ongoing, at least until Covid is considered not to be a critical public health issue or the amended 2020 regulations are repealed.

Handling carry over requests

Provided it is not going to seriously damage your business, it is probably best to accommodate requests for carry over leave whenever possible – if not all, then at least part of any accrued leave – as a gesture of goodwill to acknowledge the efforts of your people.
Such a move could help to boost staff morale, delivering an even more committed workforce for the future. West Lothian Council in Scotland has done just that by giving all council employees an extra day’s holiday as a ‘thank you’ for their efforts during the pandemic, describing the extra day as ‘recognition leave’.

Precisely when any carry over leave should be taken is also a matter for agreement within the company, as the amended regulations do not specify how and when carried over leave must be taken. Government guidance merely suggests that best practice is to give employees the opportunity to take it at the earliest opportunity – i.e. in the first year after the holiday has been carried over – if practicable.

Business critical considerations

If the absence of key workers at key times would damage your business, then the March 2020 amendment to the regulations means that employers can still tell workers when they would prefer them take their holiday. At least twice as many days’ notice as the length of the workers’ proposed holiday would have to be given, but this requirement can be waived if the worker and the employer agree.

The current regulations also give employers the right to ask workers to cancel carried over leave but only if there is a ‘good reason to do so.’ Some businesses may be tempted to encourage employees not to carry forward leave by ‘buying it out’ but an employer remains legal obliged to facilitate their employee taking annual leave and cannot replace it with a ‘payment in lieu’.

Carry over leave may also impact some aspects of your business more than others, so the temptation might be to treat requests from different departments differently. However, if you have an all-female team in one department for example, you could face a discrimination claim on gender grounds if you refuse carry over which is permitted elsewhere in the business. If you must apply different approaches to different teams, it is important to be clear on the rationale and document it, but it is always preferable to apply a consistent approach across the whole firm if you can.

Motion Paradox experts can advise about approaches to keep your business on track and your workforce on board. More general information about holiday entitlement can be found at https://www.gov.uk/holiday-entitlement-rights while the Advisory, Conciliation and Arbitration Service (Acas) can give employers free impartial advice on workplace rights, rules and best practice.

Learn more about how a human resources audit by Motion Paradox can uncover any potential issues that exist within your company’s HR policies and practices.