Should Employees be Paid for Annual Leave They Choose Not to Take? | Moorepay
September 25, 2020

Should Employees be Paid for Annual Leave They Choose Not to Take?

untaken annual leave

During lockdown, many workers chose to cancel their scheduled annual leave due to a change in their travel plans. This left a large number of employees with vast amounts of accrued leave to take before the end of their holiday year.

Some employees may be under the false impression that they are entitled to carry this leave over into the next leave year. They may even expect to be paid as compensation for any leave not taken.

Keep reading to find out what actually changed when emergency legislation was passed, and what this means for your employees’ annual leave.

A Change to Legislation

In March, the government announced new emergency legislation to allow businesses the flexibility to respond to the pandemic while ensuring that employees didn’t lose their holiday entitlement.

In short, they changed the Working Time Directive to allow some employees to carry over up to four weeks’ annual leave into the next two holiday years.

However, the right to carry over only applies where it has not been reasonably practicable for the employees to take their leave.

When is it Not Reasonably Practical to Allow Leave?

The following are factors to consider when determining the practicality of allowing leave:

  • Has your business faced a significant increase in demand due to Coronavirus that requires the employee to be at work without an alternative reasonable measure being put into place?
  • Does your employee need to take a period of rest and relaxation for health reasons?
  • Can you accommodate leave within the holiday year?
  • If an employee takes leave will it impact on wider society’s response to, and recovery from, the Coronavirus situation?
  • Can the remainder of the available workforce provide cover for the worker if they take their leave?

Encourage Your Employees to Take Leave

It’s important to recognise the health and wellbeing benefits of employees having time away from their workplace.

The guidance accompanying the change in legislation encourages employers to do everything reasonably practicable to ensure that the worker is able to take as much of their leave as possible in the year to which it relates, and where leave is carried forward.

It’s best practice to give workers the opportunity to take holiday at the earliest practicable opportunity.

Communicate Your Policy

Considering the above, now is the time to decide if the carry over option applies to you or not. We strongly recommend that you communicate your stance on this as soon as possible to help manage your employees’ expectations and avoid any potential disputes.

Contractual Carry-Over

How does the rule that allows carry-over for coronavirus-related reasons overlap with contractual carry-over rules?

Rules permitting limited holiday carry-over (for non-Coronavirus-related reasons) are common, particularly in workforces where there are peaks and troughs in demand that can make it very difficult for an employee to take all of the annual holiday entitlement, or where the annual leave allowance is very generous. They may appear in the employment contract or collective agreement (in which case they are binding), or holiday policy (in which case they can usually be changed by giving notice to staff).

An employer can minimise the impact of this potential overlap by doing what it can to minimise how much annual leave is carried over (e.g. by designating specific periods of time as annual leave – see below). If the carry-over rules are non-binding, the employer may wish to vary them, possibly temporarily.

Further, if the right to carry over is not automatic (e.g. if carry-over needs line manager approval) the employer may wish to issue a notice to the workforce confirming that only in exceptional circumstances will carry-over requests be granted in the current holiday year – essentially a ‘use it or lose it’ warning.

Can You Make Employees Use their Accrued Holiday?

Yes, you can. However, if you do not have a specific clause in the employment contract you will be required to give notice equivalent to at least twice the period of leave you require them to take.

Further Advice and Support

If you would like further guidance on managing annual leave in these uncertain times, or guidance on how to amend any of your polices, Moorepay customers can contact their dedicated account manager for help and support.

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About the author

Gillian Smith

Gill has over 10 years HR generalist experience within the retail and industrial service sectors.Whilst providing HR support and services at the most senior levels Gill’s experience includes mergers and acquisitions, complex TUPE transfers, organisational development, and strategic change management. Gill has experience in the policy development process from design, consulting with directors and employee representatives through to implementation and delivering training workshops on the new polices. Gill currently is an HR policy consultant who services a variety of clients.