On 27 March the Government amended the Working Time Regulations 1998 (WTR) to allow carry forward of up to four weeks accrued holiday leave. This will allow leave to be taken sometime in the following two years but only where the holiday leave was not taken in this current holiday year as a result of the effects of coronavirus on the worker, the employer or the wider economy or society.
This temporary suspension of the 'no carry over' rule is welcomed. It will help to alleviate pressure on employers where workers ask to reschedule leave already booked or seek to delay booking leave as a result of social-distancing requirements, business closures and travel restrictions. Instead of insisting that workers take their full holiday entitlement in this current leave year, this amendment means that employers will be able to allow up to four weeks leave to be carried forward for up to two years.
However, while employers will be able to allow or even require carry over where it has a good coronavirus-related reason to do so, this does not mean that it must do so.
Here we consider the detail and impact of this legislative change.
1. What employers should be considering now
- Start thinking about:
- How you will handle requests to postpone already booked holiday leave. The Easter holidays are nearly here.
- How you will handle requests for leave later in the year; will you allow people to carry over leave?
- Some workers may welcome a break
- Even though travel is not possible at the moment, it can still be important to take time away from work.
- Those on reduced sick pay may prefer to take their holiday leave on full pay instead.
- Listen and communicate
- Be mindful of differing worker circumstances. While some workers will be happy to take time off now as a welcome break, others may need to reschedule their untaken pre-arranged holiday to a later date or risk losing deposits/payments. Some may also be anxious to visit and spend time with friends and family they have not been able to see during the travel restrictions.
- If unable to accommodate a worker's preferred option, clearly communicate the business reasons for that decision.
Now for the detail of the change…
2. Normal rules still apply
Other than the ability to carry forward all or part of the four week holiday entitlement provided by regulation 13 WTR for up to two years as a result of the effects of coronavirus, the normal rules on taking annual leave under the WTR will continue to apply.
3. Reminder of the holiday leave normal rules
- Under the WTR, every worker is entitled to 5.6 weeks' annual leave (subject to special provisions for accrual in the first year of service).
- A week's leave should allow workers to be away from work for a week. It should be the same amount of time as the working week: if a worker works a five-day week, he or she is entitled to 28 days' leave; if he or she works a three-day week, the entitlement is to 17 days' leave. This is subject to a statutory maximum of 28 days. This means that a worker who works a six day week is only entitled to 28 rather than 32 days leave.
- Regulation 13 leave is four weeks leave and gives effect to the Working Time Directive (WTD).
- Regulation 13A leave (or regulation 26A for some pre 1 October 2007 contracts) provides an additional 1.6 weeks and is a matter of purely UK law. It is intended to represent the number of UK bank holidays in a year, but need not be used for them.
- Until this amendment, if a worker has not taken their full holiday entitlement during a leave year, regulation 13 leave cannot be carried over (reg 13(9)(a)) WTR. It is this provision that is being amended in light of the impact of coronavirus.
- In contrast it is possible for an employer to agree to the carry-over of regulation 13A/26A leave into the following leave year, but the worker cannot insist on carry-over. Following much case law, exceptions apply regarding the carry over rule in relation to those on sickness absence, family related leave and those incorrectly classed by the employer as self-employed.
- Under regulation 14, workers are entitled to be paid in lieu of untaken statutory leave entitlement but only in the leave year in which employment terminates, regardless of whether this is regulation 13, 13A or 26A leave.
- Under regulation 15, workers must give appropriate notice that they intend to take leave. These requirements can be set out in the contract. If they are not, the default position is that twice as much notice as the period of leave requested must be given.
- Under regulation 15(2), employers can:
- refuse permission for leave to be taken on particular days provided they give notice which is at least as long as the holiday requested and so long as this does not effectively prevent the worker from taking holiday at all (in other words allow rescheduling at a later time in the leave year); and
- set the times that workers take their leave, for example for an annual shutdown (exceptions exist for family related leave/sickness absence situations).
- Workers may want to take annual leave as an alternative in situations where they would otherwise be on sick leave and on reduced sick pay. This is permitted, although the employer cannot compel them to do so. Workers who are unable to take annual leave due to sickness absence and who have not had the opportunity to take leave within the same leave year must be able to carry it forward for up to 18 months.
4. What has changed
The current restriction contained in regulation 13(9)(a) WTR that prevents carry-over of any part of regulation 13 leave (four weeks) has been relaxed.
New regulations 13(10) and (11) provide that "where in any leave year it was not reasonably practicable for a worker to take some or all of the leave to which the worker was entitled under this regulation  as a result of the effects of coronavirus (including on the worker, the employer or the wider economy or society), the worker shall be entitled to carry forward such untaken leave" to be "taken in the two leave years immediately following the leave year in respect of which it was due."
Under new regulation 13(12), an employer may only require a worker not to take regulation 13 leave on particular days as already provided for in regulation 15(2) where the employer has good reason to do so.
The provision on payment in lieu of untaken holiday leave on termination of employment also makes it clear, that if termination takes place in one of the years into which leave was carried forward, any carried forward leave will need to be paid in full, with only the fresh holiday year entitlement for that year being subject to the pro-rata formula.
5. What does the change mean?
This is in effect a temporary relaxation of the prohibition of regulation 13 leave introduced in response to the effects of coronavirus. This is not limited to the impact on the individual worker's health but extends to the impact on the employer's operations or on the wider economy or society.
For example, employers will not now need to ensure that all workers take their full leave entitlement in the current leave year. Employers will not need to worry that if they allow all or the majority of their workforce to defer taking annual leave until after the current coronavirus restrictions are lifted, it will be faced with the difficulty of accommodating too many members of its workforce wanting to take holiday at the same time.
Where an employer has a good reason to do so, employers can refuse permission for leave to be taken in the current leave year. Instead leave will be carried over. Employers can also cancel previous booked holiday leave for later in the current leave year, provided they give notice that is at least as long as the holiday requested (or in accordance with a contractual provision), and they have a good reason for doing so.
6. What has not changed?
- While carry over is now permitted, workers who are not on sick leave or statutory family related leave (maternity, paternity etc), can still be instructed by their employer to take statutory annual leave on particular dates, provided that they are given the required amount of notice. The amount of notice will be as contained in the contract of employment. If silent, the default position is that twice as much notice as the period of holiday leave to be taken must be given.
- The carry forward period of up to two years applies in relation to regulation 13 leave only, so four weeks leave. It does not apply to the additional 1.6 weeks entitlement under regulation 13A/26A, which remains restricted to the existing provisions for carry over into the following leave year that are subject to agreement.
7. Deemed order conundrum?
Despite making a distinction regarding the potential permitted carry over period of up to two years in relation to regulation 13 leave but only one year in relation to regulation 13A/26A leave, the WTR still remain silent on the order in which the different class of holiday leave are deemed taken.
Unfortunately case law also does not provide clear assistance on determining the order in which the different classes of leave are taken (this is also important for other reasons such as what must be included in calculating the related holiday pay). Some case law points to the regulation 13 leave being deemed taken first, followed regulation 13A/26A leave and then any additional contractual leave (option 1). However, other case law unhelpfully says that an individual's holiday entitlement must be considered a "composite whole", with each day's leave consisting of entitlement under all sources taken together (option 2).
While we continue to await future expected Supreme Court guidance on this issue, some employers will have deemed order provision in their annual leave policies in accordance with option 1.
Carrying forward holiday leave from the current holiday year into the next should not present any administrative difficulties. However, if some untaken leave from the current leave year is taken into the leave year after the next leave year, so second carry over year, employers will need to keep track of the class of statutory leave being carried forward into that leave year.
Please contact us if you have any questions regarding the above.