COVID: Handling annual leave, what should employers be doing?

Annual Leave
It’s a difficult time for business owners, trying to get their business back on track following COVID lockdowns. How can you manage staff leave effectively?

Can a worker be furloughed and on annual leave at the same time? Can you force an employee to use up a proportion of their annual leave? Two questions that many HR Consultants are currently facing.

The official answer is yes for both!

With everyone’s holiday plans on hold due to the travel restrictions caused by the Coronavirus, this should provide reassurance to employers who are concerned about their ability to manage the holiday entitlement of their team when things ‘return to normal’.

The main concern is that many employees have already cancelled summer annual leave bookings with plans to use it at a later date once the world is out of lockdown.  However, as there is no knowledge about when this is likely to happen, many employees will end up with a lot of accrued holiday towards the end of the year.  

Small business owners are therefore understandably concerned about the impact on operations if everyone asks to take holiday at the same time, just when life is getting back on track and when businesses need commitment from their workforce more than ever to rebuild. 

So, what are your options as a business owner?

1. Defer untaken leave into the next two holiday years. 

In acknowledgement of the potential large build-up of holiday entitlement, the government have recently introduced temporary new rules which relax the current ones under the Working Time Regulations. 

This means that employees can carry over 4 weeks (fte) of holiday entitlement from this year into the next two holiday years where it has not been “reasonably practicable” for them to take some or all of this leave ‘as a result of the effects of Coronavirus’. 

This provision is aimed at relinquishing employers from their normal duty to give their workers an opportunity to take their full holiday entitlement in this current holiday year. Although the change is aimed at ‘key industries’ where NHS staff for example are likely to be unable to take any leave due to work demand, it can apply to all organisations and all workers. As an employer you can refuse holiday requests if you have “a good reason to do so”.

Factors to consider if choosing this option:

  • If a worker’s employment is terminated during the two-year period, any payment in lieu of holiday must include a payment in lieu of holiday carried over under these provisions.
  • Looking ahead, will allowing a team of employees to each carry over a high level of additional’ annual leave into the next two years cause future operational capacity issues?
  • To protect an employee’s health and wellbeing, it remains important that your people are able to switch off from work and recharge where possible, particularly with so many employees working from home where boundaries become blurred. Therefore extending this holiday deferral option to your employees may inadvertently discourage them from taking the opportunity to rest and take a break during an unsettling time where they might need it the most.

2. Reserve the right to request staff take a proportion of their accrued annual leave whilst on furlough leave or still working through the crisis

It is important to note that the term ‘holiday’ in HR terms refers to an employee taking a break from their work, not to a right for that time to be spent in a specific way (for eg. sunbathing on a remote greek island). Therefore, whilst most businesses are quieter or closing down operations during the pandemic, it would be reasonable for employers to request employees take holiday. 

How do I do this you ask? Well employers still retain the right under the Working Time Regulations to give employees notice ordering them to take their statutory holiday on specified dates, provided such notice is twice the length of the period of leave the worker is being ordered to take. Also check the employees employment contract or your company policies for any other applicable terms.

We would stress the importance of effective communications if you do request that employees, either for business or wellbeing reasons, take holiday during the current situation. From a motivation and engagement perspective, we would recommend clearly explaining the rationale behind your decision to minimise any potential resentment. The best outcome would be to reach a compromise that both parties agree with, that takes into account both the business needs and the wishes of the employee.  Of course, those on furlough leave at 80% pay will be paid at their full rate for any holiday period so this may be a welcomed suggestion.

3. Pay in lieu

 Although as an employer you are not allowed to make a payment to an employee in lieu of their statutory holiday allowance, you may be able to for any enhanced contractual holiday (so any hours or days above the annual 5.6 weeks). If circumstances require it, you could try and agree with employees to vary the terms about enhanced holiday temporarily, so that the enhanced amount can be converted into money and paid as a top up of their wages. 

Holiday entitlement and pay can be a confusing and sticky subject at the best of times, let alone when last-minute changes are announced. If this is something you would like to chat over don’t hesitate to contact us! 

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