Managing Covid-related holiday accrual

From furlough to cancelled time off, Emma O’Connor explains how organisations can deal with mounting levels of annual leave among their workforce

Many companies are reporting that staff have not taken, or have cancelled, holiday during lockdown. As Covid travel restrictions ease, more people are travelling abroad; however, the list of countries on the quarantine list – or could be with very little notice – is deterring some from taking their holiday allowance. 

From a welfare perspective, whether their workforce is actively working or not, employers should ensure staff are taking at least their basic minimum holiday entitlement of 20 days per holiday year. Managers should actively encourage the opportunity to switch off to avoid burnout or other physical or mental health conditions. A failure to manage such health and safety issues effectively could result in personal injury or negligence claims, grievances, resignations and constructive or unfair dismissal challenges.

Businesses are working hard to ensure they are compliant with Covid-19 risk assessments and obligations, as well as fulfilling client or customer orders. There has been an increase in ‘virtual presenteeism’ while employees have been working remotely, with many employees feeling pressured to always be online – this has caused the lines between work and family life to become blurred. Many have also been caring for family members or children at home, or worrying about jobs, finances and relatives. For those who are furloughed or on unpaid leave, it’s vital to ensure good communication and encouragement to take time off.

However, organisations may encounter a situation where many staff request leave in the autumn, just when businesses are gearing up to reopen or increase output. The issue has been alleviated somewhat by new legislation introduced in March 2020, which allows basic minimum holiday that has not yet been taken because of Covid-19 issues to be carried over for up to two holiday years after the employer’s current holiday year. This will not apply to any additional Working Time Regulations 1998 holiday or any contractual holiday. The employer may already have provisions in its contract of employment to allow for carry over, or this might be something they want to agree with their workforce.

And if employees leave, any accrued but untaken holiday calculated to the termination date will have to be paid. Holiday pay is at normal wage rates (so pre-furlough pay). This could be a huge financial burden for employers at a time when they are looking to balance their books.

There are, fortunately, some steps that organisations can take to help them avoid such difficult situations.

Whether employees (or workers) are on furlough or working, employers can, under the Working Time Regulations, designate when holiday should be taken. Provided an employer gives twice the notice for the holiday it wants the employee to take, employees would need to take holiday when designated by their employer. Although Acas says businesses can require employees to take holiday during furlough or work, they should avoid arbitrarily requiring staff to use up accrued annual leave during this time as it could be seen as an abuse of the employer’s powers. Some companies may also have to consult with unions or other employee bodies. 

For furloughed employees, holiday entitlement remains the same. They accrue the statutory holiday entitlements during the period they are furloughed, together with any additional days specified in their contract. They can take holiday during a period of furlough leave and must be paid their normal (pre-furlough) pay including variable pay such as commission. If this rate is higher than the amount the employee receives while furloughed, their employer must pay the difference. The employer can continue to claim through the government’s job retention scheme while the scheme is still in operation, as holiday does not interrupt furlough status and leave, provided, of course, the employee/employer continues to meet the conditions of the job retention scheme. 

Acas has produced a useful (but non-binding) set of guidelines for employers managing the workforce implications of coronavirus. 

Firms should also take an audit of workforce holiday – which employee has accrued what, and how much is left to be taken until the end of the holiday year. This will also help with workforce planning, particularly as we move to the end of full government funding of the job retention scheme from the end of October.

Everyone’s lockdown experiences are different. Employers must recognise this and make sure they are prioritising staff welfare – and ensuring employees are taking holiday is a big part of this. Managers also need to lead by example and show it is fine to take holiday. Businesses can ensure they aren’t left short of staff just when they need them, and that employees get the break they need, by taking a positive and proactive approach to holidays. They must decide what is right for their particular situation and be consistent and fair in how they apply policies and rules.

Emma O’Connor is head of training at Boyes Turner