Government amends the Working Time Regulations to allow holiday carry over for the next two leave years

Background

The Working Time Regulations 1998 (WTR) give workers 5.6 weeks of annual leave in each leave year. The WTR specify that 4 weeks of this leave must be taken in the leave year to which it relates, and the remaining 1.6 weeks can only be carried over by agreement with the employer for one leave year.  There are some exceptions to this, including where workers cannot take annual leave due to sickness or maternity leave.

Employers can agree to employees carrying over their holiday into the next leave year, but do not have to allow this.  Employers are also unable to require workers to carry over their statutory holiday.

Amendment to the WTR

The Working Time (Coronavirus) (Amendment) Regulations 2020 amend the WTR by allowing workers to carry over up to 4 weeks of annual leave where it was not “reasonably practicable” to take this leave as a result of the effects of coronavirus. The unused leave can now be taken in the 2 leave years immediately following the year in respect of which it was due to be taken.

The rules on payment in lieu of any untaken annual leave where a worker’s employment terminates have been amended, to include any leave that has been carried forward under this new provision.

The new regulations also say that an employer may only require a worker not to take this carried over leave on particular days where it has “good reason” to do so.  Normally the WTR allow the employer to prevent an employee from taking leave on their requested dates by giving advance notice of at least as many days as the leave that is being refused – e.g. 5 days’ notice to refuse 5 days of leave.  The requirement for a good reason is a new addition for leave carried over due to coronavirus, presumably to make sure that workers are able to actually take the leave.

The Government published new guidance on holiday pay entitlement and pay during coronavirus on 13 May 2020 outlining how holidays and pay operate as a result of the coronavirus pandemic. Further explanation has been provided with respect to the carry over of annual leave and when it will not be ‘reasonably practicable’ to take leave. The guidance stresses that employers ‘should do everything reasonably practicable to ensure that the worker is able to take as much of their leave as possible…’

In respect of workers who have been furloughed, the guidance notes that they are unlikely to need to carry forward annual leave. However, given that they will need to be paid their usual rate of holiday pay (likely to be higher than the government grant), if the employer is unable to shoulder the additional cost by making up the difference, the guidance suggests this would make it not reasonably practicable for the worker to take the leave.

Where workers have carried leave forwards, the guidance suggests best practice would be for employers to allow workers to take their leave for new holiday year first, as the carried-over holiday lasts for up to 2 leave years. Employers should also note that it remains unlawful to pay employees in lieu of allowing them to take their statutory leave.

Implications

This move will no doubt reassure workers who are currently at risk of losing out on annual leave entitlement due to the national effort against the coronavirus. It also allows for greater flexibility for employers who are unable to ensure that workers take their 4 weeks of annual leave this year due to coronavirus – particularly in key industries such as food and healthcare.

In announcing these changes to holiday carry-over the Business Secretary Alok Sharma said, “Whether it is in our hospitals, or our supermarkets, people are working around the clock to help our country deal with the coronavirus pandemic.  Today’s changes will mean these valued employees do not lose out on the annual leave they are entitled to as a result of their efforts, and employers are not penalised”.  The Environment Secretary, George Eustice has commented: “At this crucial time, relaxing laws on statutory leave will help ensure key workers can continue the important work to keep supplies flowing, but without losing the crucial time off they are entitled to.”

Leave can only be carried over if the effects of coronavirus mean it was not practicable to take it in the current leave year.  “Effects” is defined quite widely, including effects on the worker, the employer or the wider economy or society.  It does not seem that this is intended to cover simple practical difficulties in taking leave caused by coronavirus, such as cancellation of overseas holidays, as opposed to work pressures in key industries. This is illustrated by the newly released guidance which emphasises that employers should do everything reasonably practicable to allow workers to take their leave in the applicable leave year.

The stated aim is to allow businesses under particular pressure from the impacts of COVID-19 the flexibility to better manage their workforce.  However, this may still provide some assistance to businesses who have been seriously affected by coronavirus and have employees working from home or on furlough, who might otherwise want to use all of their statutory entitlement on return to the workplace before the leave year ends.