With Christmas approaching, accrued holiday entitlement is becoming a ticking time bomb liability for many employers, according to Nick Hine of employment law specialist Hine Legal, particularly as employers cannot pay in lieu of accrued holiday except on termination of employment.
Many employers who have furloughed their employees during part or the whole of this pandemic will likely find that many employees will have accrued a large amount of holiday, which they have not been able to take or wanted to take during the pandemic. and for many that leave year will end in December.
This is despite the Working Time (Coronavirus Amendment Regulations) passed in March 2020 which permitted the carry-over of the first four weeks of annual leave in to the following two years where it was not reasonably practical to take it in the leave year as a result of the effect of the coronavirus. The government guidance included a number of factors as to whether this was to be applied and as a result it is likely that those carry over rights only apply to keyworkers whose roles involved essential activities in responding to the pandemic.
This is supported by the fact that furlough workers are permitted to take and be paid in full for holiday during any furlough period.
Many employees who are not key workers will now therefore have accrued a large amount of untaken holiday within the leave year.
So, what are the employer’s options?
According to Nick Hine, “Many employers do not realise that they can require employees to take holiday provided they give twice as much notice as the holiday they require the employee to take.”
Therefore, even if the employee has been furloughed, employers can require employees to take holiday during the furlough period provided they give the adequate notice and the government will fund part of that holiday liability.
“This can include during any notice period which can save the employer having to pay twice. If on furlough the employer has to top-up to full pay during that period.”
Nick Hine recommends that employers take the following approach to this build-up of annual leave:
1. Calculate how much accrued annual leave employees have for the remainder of the holiday year. What will this liability cost?
2. With Christmas approaching considering, what leave you could require the employee to take and it may well be worth discussing with the employee so that you can potentially use the Christmas period to reduce this annual leave liability (assuming this fits in with the business plans).
3. If the employee is not going to be able to take the annual leave do you agree that the employee (unless the contract provides for this) can carry over a certain number of days into the new leave year provided it is taken by a particular date, for example, 31 March 2021.
4. If you cannot agree with the employee what holiday they will take, then serve notice on the employee requiring them to take holiday. Blocks of weeks are probably most sensible.
5. Discuss with employees their holiday plans so that you can manage the ongoing liability and plan how to reduce it.
Nick Hine concludes, “Many businesses are already stretched with the impact of Covid-19 and lockdown and employment and personnel issues have been high on the agenda. With Christmas approaching employers need to consider how they could potentially alleviate the headache of this annual leave liability and we advise that they do this immediately.”