There is a lot of confusion around holiday leave, sick leave and leave for those on furlough. We answer some of the most common questions.

Are employees who are absent on sick leave, furlough leave and unpaid entitled to accrue holiday?
Whilst on sick, furlough or unpaid leave, the right to accrue statutory holiday of 28 days remains. The basic rule is anyone who remains an employee will accrue holiday regardless of the type of leave they are on.

Can you take holiday whilst on sick leave?
No, you can only be on one type of leave at once. However, an employee can choose to end their sick leave and take holiday leave instead.

What happens if an employee becomes sick whilst on annual leave?
If an employee falls sick during a period of holiday leave, and reports it to his or her employer then the employee may opt to take the applicable period as sick leave, and take the holiday leave at a later date.

Can you take holiday whilst on furlough leave?
Employees on furlough leave can take holiday without disrupting their furlough. Employers must be careful to ensure that furloughed employees receive holiday pay at the rate they would normally receive if they were at work and working. The employer can continue to claim the 80% grant from the government to cover most of the cost of holiday pay.

Can an employer make a payment in lieu of holiday?
This is not possible during employment. Annual leave can only be replaced by a payment in lieu on the termination of employment. The basic principle (subject to the specific points on furlough leave), is that if holiday is not taken, it is lost.

Can I cancel my employee’s holiday if it was booked prior to the pandemic?
Employers can cancel an employee’s holiday if they give sufficient notice to the employee. The employer must give notice which is the equivalent of the length of the planned holiday if the employer wishes to cancel an employee’s holiday or require the employee not to take holiday on particular dates. Employers can ask employees to take or cancel holiday with less notice but need the employee’s agreement to do so.

Do employees have to use holiday within the holiday year?
During the coronavirus period it is recognised that it may be more difficult to take holiday entitlement within the holiday year and employees may be getting to the end of their leave year with holiday still left to take.  Employers should apply their usual holiday carry over rules, however in the absence of a holiday carry over policy the government has provided additional guidance (see below).

Holiday carry over whilst on long-term sick leave.

Employees on long term sick leave are only able to carry forward the 20 days required by the European Directive, not the additional 8 days provided under UK law unless an agreement says otherwise (such as the employee’s contract of employment).

How should employers decide whether holiday carry over is necessary?
When considering whether it is not practical for an employee to take their annual leave as a result of the coronavirus and if leave should be carried into future leave years, employers should consider the following:

  • whether the business has faced a significant increase in demand due to coronavirus that would reasonably require the worker to continue to be at work and cannot be met through alternative practical measures
  • the extent to which the business’ workforce is disrupted by the coronavirus and the practical options available to the business to provide temporary cover of essential activities
  • the health of the worker and how soon they need to take a period of rest and relaxation
  • the length of time remaining in the worker’s leave year, to enable the worker to take holiday at a later date within the leave year
  • the extent to which the worker taking leave would impact on wider society’s response to, and recovery from, the coronavirus situation
  • the ability of the remainder of the available workforce to provide cover for the worker going on leave

Employers should do everything reasonably practicable to ensure that employees are able to take as much of their leave as possible in the year to which it relates, and where leave is carried forward, it is best practice to give workers the opportunity to take holiday at the earliest practicable opportunity.

Communicating holiday carry over to employees

There is no statutory requirement to give employees notice that they will be able to carry holiday forward if they do not take it. However, it is unlawful for employers to prevent employees from taking holiday to which they are entitled.

To ensure that employees do not lose the holiday entitlement that they are entitled to, it is best practice for employers to inform employees of both the need to carry forward, and how much leave will be carried.

When does the two year carry forward period start from?
The Coronavirus Amendment regulations came into force with immediate effect on 27 March 2020. Therefore, they will apply to the accrual of holiday on or from 27 March 2020. The two year carry forward period will depend on when the employers holiday year runs.

For example, if the holiday year ends on April 2020, holiday accrued in the April 19 to April 20 holiday year can be potentially carried forward until April 2022. If the holiday year began in January 2020, then holiday can potentially be carried forward to January 2023 (because the next two leave years are January 2021 to January 2022 and January 2022 to January 2023 respectively).

Do employees whose employment is terminated have the right to receive payment for any accrued but untaken holiday?
Under the Working Time Regulations 1998 an employee is entitled to receive payment for any untaken holiday on termination.  This would include any carry forward holiday.

Do you have to alter the holiday entitlement for those members of staff who decrease and then increase their number of hours they work in response to the corona virus pandemic?
Yes. If you have workers who change their hours of work, you must look at each period separately to work out how much holiday they are entitled to receive.

Can you force an employee to take holiday?
Employers are able to require an employee to take annual leave. Where it is reasonably practicable for an employee to take annual leave, employers should facilitate this.

Employers remain able to require employees to take annual leave to ensure that holiday is taken in the leave year to which it relates. There is also nothing to stop an employer and employee agreeing that a period of leave should be designated as annual leave.

What about bank holidays during furlough leave?
Where a bank holiday falls inside a employee’s period of furlough and the employee would have usually worked the bank holiday, their furlough will be unaffected by the bank holiday. However, if the employee would usually have had the bank holiday as annual leave, there are 2 options.

The bank holiday is taken as annual leave

If the employer and the employee agree that the bank holiday can be taken as annual leave while on furlough, the employer must pay the correct holiday pay for the employee. Employers may also require employees to take the bank holiday as annual leave with the correct notice periods.

The bank holiday is deferred

If the employer and the employee agree that the bank holiday will not be taken as annual leave at that time, the employee must still receive the day of annual leave that they would have received. This holiday can be deferred till a later date, but the employee should still receive their full holiday entitlement.

Can furloughed employees carry over holiday?
Employees who are on furlough are unlikely to need to carry forward statutory annual leave, as they will be able to take it during the furlough period. However, to do so they must be paid the correct holiday pay which is likely to be higher than the rate of pay that will be covered by government grants, with the employer making up the difference.

If, due to the impact of coronavirus on operations, the employer is unable to fund the difference, it is likely that this would make it not reasonably practicable for the employee to take their leave, enabling the employee to carry their annual leave forwards.

In this situation, the employee must still be given the opportunity to take their annual leave, at the correct holiday pay, before the carried annual leave is lost at the end of the next 2 leave years.

What happens to previously booked holiday?
If an employee no longer wants to take time off which they had previously booked, for example because their holiday’s been cancelled, their employer may still tell them to take the time off (see “can I force an employee to take holiday” above).

If the employee wants to change when they take this time off, they’ll need to get agreement from their employer.

How do you calculate holiday leave and pay for variable hours staff?
Variable hour employees are paid holiday pay at the rate of 12.07% of the hours worked as this is the percentage to ensure they have the pro-rated equivalent of 5.6 weeks paid holiday, at the correct rate of pay, per annum.

For employees or workers whose hours differ from week to week and/or are paid at different rates, holiday pay will be calculated on the average pay currently earned in the past 12 weeks, but increasing it to 52 weeks from April 2020.

How can I manage my employees’ holiday leave?

  • Actively encourage employees to book and take holiday in the relevant holiday year.
  • Remind employees that the usual, use holiday or lose it rule applies and that the carry forward only applies where it is not reasonably practicable for employees to take holiday in the relevant holiday year.
  • Reach mutual agreements with employees regarding the taking of holiday during any period of furlough leave or switching unpaid leave to holiday. For example, an employer could suggest that employees take a day or a number or days off per month to ensure they have adequate breaks from work.
  • Devise a fair policy for the booking and agreeing of holiday leave, after the lockdown period, anticipating potential business needs, with a view to devising a strategy to use holiday up in the relevant holiday year (if this is preferable to the business).
  • Instruct employees to take holiday by giving them notice of twice the amount of the holiday leave you require them to take.

Download this page as a Holiday-fact-sheet-14-May-2020.pdf (284 downloads) Information correct as of 21 May 2020.