Holiday during coronavirus: What are employees' rights and employers' options?

As the ongoing pandemic continues into what normally would have been the start of the ‘holiday season’, employers are starting to consider how best to deal with holiday entitlement at a time when we remain limited in what we can do.

This consideration is particularly pertinent in respect of furloughed employees who could now, potentially, not be back at work full time until the end of October.

Annual leave and the Coronavirus Job Retention Scheme

Can employees take holiday whilst on furlough?

Yes. Despite some initial uncertainty around the accrual and taking of annual leave, government guidance on the Coronavirus Job Retention Scheme (CJRS) now confirms that

• holiday continues to accrue during furlough; and
• this applies to the statutory 5.6 weeks plus any further contractual entitlement (unless different arrangements have been made in respect of contractual leave, under any furlough agreement or furlough policy).

The guidance also clarifies that employees can take holiday whilst on furlough, without it interfering with the CJRS.

Can employers require employees to take holiday during furlough?

In theory, yes. Provided employers give employees the requisite notice period, being at least twice the length of the period of leave that an employee is being asked to take, furloughed employees (like any other employees) can be compelled to take annual leave during furlough.  So, for example, if an employer wants an employee to take five days’ leave, they will need to give the employee at least ten days’ notice. Bear in mind, however, the purpose of leave: to promote rest, relaxation and wellbeing…which brings us neatly on to our next topic…

Wellbeing and annual leave during a pandemic

Employers should keep in mind that the Working Time Directive was introduced as a health and safety measure; the purpose of annual leave is to grant workers a period of rest, relaxation and leisure. It is, therefore, arguable that employees who are compelled to take leave at this time are not benefitting from annual leave as envisaged under the health and safety objectives of the Directive.

For employers in England, this argument is perhaps weaker now as the restrictions are starting to be relaxed. However, in respect of shielding employees who are self-isolating in line with public health guidance, there is definitely scope for suggesting that the purpose of leave cannot be met, which could lead to a potential challenge in the future. Caution should also be taken where employers have operations in other parts of the UK, including Scotland and Northern Ireland where the ‘stay at home’ message remains, and the gradual lifting of restrictions does not mirror those in England. Of course, the opposite could be argued: that the enforced shutdown promotes ‘rest and relaxation’ and the fact that it is not possible to jet off on holiday does not necessarily mean it is not a restful period.

Employers should also be mindful of employees deferring leave until after restrictions have been lifted. Employees still need to take a break, and should be encouraged to do so. There may also be practical issues with large numbers of employees ‘saving up’ leave until restrictions are eased and then wanting to take holiday at the same time.

Holiday pay whilst on furlough

How should employers calculate pay for employees who take holiday during furlough?

Employees who are on annual leave are entitled to their ‘normal remuneration’ i.e. the same pay that they would have received, had they been working, rather than their furlough pay (if that’s less than their normal remuneration).

The government guidance confirms that, unless agreed otherwise, furloughed employees should be paid their usual holiday pay, in accordance with the Working Time Regulations 1998/ Working Time Regulations (Northern Ireland) 2016 (WTRs). This means that where employees are being paid less than their normal remuneration while on furlough leave, their employer will be obliged to top this up to the normal amount. There are complicated rules on how to calculate holiday pay, and further guidance can be found here.

What can employers recoup under the CJRS during holiday absence?

Even though holiday should be paid at full pay during furlough leave, employers can only recoup the usual 80%/£2500 of wages under the CJRS.

However, for contractual holiday (that additional element of holiday an employee may be entitled to under their contract, over and above the minimum entitlement they have under law), employers may be able to agree a reduced rate with employees for holiday taken during furlough leave.

Bank holidays

If furloughed employees would have usually worked on a bank holiday, their furlough remains unaffected. However, if employees would typically have taken paid leave for a bank holiday that falls during furlough, there are two options.

• Employers can agree with their employees that a bank holiday will be taken as normal, and paid as annual leave, which as outlined above should be paid at normal rates of pay. If an employer is compelling an employee to use holiday in this way, they must give them the relevant notice (2 working days); or
• Employers can agree with their furloughed staff that the bank holiday will not be taken as annual leave. Instead, the bank holiday will be deferred and can be taken at a later date, at a time to be agreed with the employer.

The ability to carry over holiday

Back in March the government introduced temporary measures which amended the WTRs to extend the circumstances in which annual leave can be carried over to subsequent holiday years. Prior to these changes, workers had to “use or lose” most of their holiday and were only entitled to carry up to 1.6 weeks’ leave over, with the agreement of their employer.

The new legislation permits the carry-over of the other 4 weeks’ statutory leave where it is not “reasonably practicable” to take it in the leave year “as a result of the effects of coronavirus.” This must be taken in the following 2 years. It is currently unclear what circumstances this includes but ACAS guidance suggests it includes those who are self-isolating or are too sick to take holiday, and those who have had to continue working. Equivalent guidance provided by the Labour Relations Agency in Northern Ireland also does not provide any clarity on the particular circumstances in which this may apply save that the law applies to any employee or worker who is unable to take holiday “because of coronavirus.”

Note that the provision relating to carry over does not give employees the automatic right to carry leave over unless an employee’s ability to take annual leave has been genuinely affected by coronavirus. Furloughed workers are, therefore, unlikely to need to carry leave over (unless they are self-isolating or their employers are unable to pay the top-up amount).

Note also that the right to carry over only applies to the 4 weeks of statutory leave under the European Working Time Directive. Employers are free to come to different arrangements for the additional 1.6 weeks under the Working Time Regulations and any further contractual leave.

What should employers do now?  

• Where possible, employers should remain flexible in respect of annual leave and should have an open dialogue with their employees.
• Employers may wish to encourage employees to take annual leave in the year that it should be taken, highlighting the benefits that leave can have on mental health and wellbeing.
• Employers may need to give some thought to how they will manage an accumulation of leave, if their workforce is likely to take advantage of the extended period of carry over.
• If compelling staff to use their annual leave, employers should consider if employees will be particularly disadvantaged by this, particularly in light of the current restrictions. Employee agreement should be reached if possible.
• Bearing in mind that normal rules relating to discrimination apply, so employers should ensure that any decisions they make regarding an employee’s holiday entitlement are fair and consistent with how other employees are being treated.

For further information on holiday during coronavirus, see Government guidance: Holiday entitlement and pay during coronavirus.

Please follow us on Twitter for regular updates on the fast moving changes to employment law during this situation: @TLT_Employment

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at May 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions.