Does the coronavirus crisis mean a holiday hiatus?

Catherine Taylor and Alison Woods explain how employers should handle annual leave requests during the pandemic

The coronavirus pandemic has thrown up some specific challenges around dealing with holiday – especially as employees are not able to take the traditional week in the sun or city break. The government has also intervened in the debate to ensure that those who are working for the public good don’t lose out on holiday entitlement.

If employees who are currently working want to cancel their holiday because of the lockdown, can the employer refuse?

The relevant legislation provides that both employer and employee must give notice of when holiday can or, in the employer’s case, cannot be taken. There are specific requirements in the legislation as to the amount of notice, although these may be less relevant where the request to cancel is last minute. Businesses should check their employment contract or handbook for any specific provisions, but if an employee asks to cancel holiday the employer can specify that they are nonetheless required to take that holiday as usual or that cancellation of holiday will not be accepted.

Many companies are also encouraging employees to take holiday even though they can’t get away. A break from the virtual office or juggling work and family responsibilities is important from a wellbeing perspective.

If an employee won’t use their full holiday entitlement this year is there any flexibility to allow them to carry it over?

The rule generally is that the four-week statutory leave cannot be carried over but leave above that minimum can be where the employer allows it. Based on this rule, many businesses allow staff to carry over five days’ leave, but usually to be taken within a limited time period.

The government has responded to this issue by making regulations that came into effect on 27 March 2020. These set out an exception to normal rules to prevent employers being left "short-staffed in some of Britain’s key industries, such as food and healthcare".

Now, in any leave year where it is not reasonably practicable for a worker to take leave as a result of the effects of coronavirus (including on the worker, the employer or the wider economy or society), the worker can carry forward up to four weeks’ leave into the next two leave years. This exception to the normal rules will apply to all industries.

Acas has also published guidance that states the exception may apply, for example, because employees are self-isolating or are too sick to take holiday before the end of their leave year, or they’ve been temporarily sent home as there’s no work (‘laid off’ or ‘put on furlough’) or they’ve had to continue working and could not take paid holiday.

The government press release and the Acas guidance are silent on whether the exception to the carry-over rules will apply where employees’ travel or other plans have changed, but the view generally is that it will not. Although a change in travel plans is arguably a result of the effects of coronavirus, it would still be reasonably practicable for an employee to take leave from work, they just won’t be able to go away (or indeed anywhere – an extreme staycation). On this basis the application of the exception may be relatively limited beyond those in public service or industries that are seeing increased demand or pressure directly because of Covid-19.

What is the position on holiday entitlement during furlough?

Although HMRC guidance on the coronavirus job retention scheme is silent on the accrual or taking of holiday during furlough, it seems likely that employees will continue to accrue statutory holiday entitlement while on furlough. In relation to additional contractual holiday, this will depend on what has been agreed with employees as part of the furlough agreement.

In terms of taking holiday during furlough, the Acas guidance referred to above is contradictory. It gives furlough or layoff as an example of a reason an employee can’t take holiday, which would trigger an ability to carry over. It also states that an employee can take and be required to take holiday (in particular bank holidays) during furlough. There is case law that is consistent with an employer having the right to require an employee to take holiday during furlough.

However, even if that issue is resolved, there is considerable uncertainty about what businesses should pay employees for holiday that is taken during furlough. There is a reasonable argument that it would be more than reduced furlough pay and may need to be calculated on the basis of full salary and any bonus, commission or allowances paid historically. Further guidance on this topic from the government or HMRC would be welcomed by employers.

Catherine Taylor and Alison Woods are employment partners at CMS