The right to holidays
The Working Time Regulations 1998 sets out a right to annual leave of a minimum of 5.6 weeks holiday every 12 months. This is made up of four weeks holiday, which should generally be taken within the annual leave year, and 1.6 weeks holiday which can be carried over into the next leave year where a workforce agreement, such as a collective agreement, allows for this. A contract of employment may also entitle workers to further additional annual leave. For example, this may provide for an entitlement to all bank holidays in addition to their 5.6 weeks and an entitlement for an increased proportion of annual leave to be carried over.
As a result of the Working Time (Coronavirus) (Amendment) Regulations 2020 (the Amendment Regulations) which came into force on 26 March 2020, workers, for whom it has not been reasonably practicable to take some or all of their statutory four weeks leave, can carry it over into the next two leave years following the one in which it was due to be taken.
Statutory holiday pay must be paid at a worker’s normal remuneration i.e. based on the pay they received when at work including any shift premia and overtime. For those who do not have normal working hours or are paid variable pay, holiday pay is based on an average calculated over 52 weeks, excluding those weeks where they were not paid anything.
Taking holidays during furlough
The government guidance issued on 13 May confirms that workers on furlough are entitled to accrue both statutory holidays and contractual holidays during the period they are furloughed. If a worker takes a holiday during furlough this does not break the furlough period. However, the worker is entitled to be paid at their normal rate of pay. In other words, what they were paid in the last pay period before furlough (or where the worker does not have normal working hours or is on variable pay an average over 52 weeks prior to starting furlough) for any holiday taken during furlough. This means that if the worker is furloughed at 80 per cent of pay the employer must pay the worker the difference between the 80 per cent of pay and the full pay they would normally have received.
On the vexed issue as to whether the employer can insist that a worker takes holiday during furlough the guidance states: ‘If an employer requires a worker to take holiday while on furlough, the employer should consider whether any restrictions the worker is under, such as the need to socially distance or self-isolate, would prevent the worker from resting.’
The underlying principle of paid holiday, which is established by case law and reiterated in the Explanatory Memorandum to the Amendment Regulations is: ‘to ensure that workers receive time off work to rest and recover and enjoy leisure facilities.’ Case law has already held that a worker on sick leave cannot be required to take holiday while they are sick because the purpose of sick leave is to enable the worker to recover from illness whereas the fundamental purpose of holiday is to relax and enjoy leisure time.
Others have argued that holiday during furlough should be treated in the same way as sick leave (see Furloughing and fundamental rights: the case of paid annual leave by Professors Michael Ford and Alan Bogg). We agree and consider that, at the very least, those who are furloughed and clinically extremely vulnerable (i.e. shielding in accordance with public health guidance), those who are clinically vulnerable, such as those over the age of 70, have asthma, diabetes, chronic heart, liver or kidney disease, have a neurological condition (e.g. MS or Parkinson’s disease), a weakened immune system and who are pregnant and those who are caring for a clinically extremely vulnerable or a clinically vulnerable person, should be treated in the same way as those on sick leave. This is on the basis that any holiday would not be a period of rest, relaxation and leisure time.
This is not to say that all other workers on furlough can be required to take holiday during furlough, as each case will depend on the particular facts and circumstances. In this Mental Health Awareness Week and amid reports of the adverse impact of the lockdown on low paid workers and on mental health, it will not always be easy to determine if imposed holiday during lockdown is a period of rest, relaxation and leisure.
ACAS recommends employers and workers ‘should be as flexible as they can about holiday during the coronavirus pandemic.’ Designating periods of furlough as holiday without any consideration of an individual’s circumstances and without any consultation with workers and their union representatives is not, in our view, either flexible or reasonable.
Employers will also need to bear in mind the effect of the right to be paid holiday pay at the normal rate of pay. In particular, an employer who does not pay the worker any period they choose to designate as holiday during the furlough period at the full normal rate of pay is unlikely to be able to insist that the time taken amounts to holiday.
Carrying over holiday
The Amendment Regulations allow workers who have not been able to take the statutory four weeks holiday where it was not ‘reasonably practicable’ as a result of the ‘effects of coronavirus’, to carry over holiday into the following two leave years. The ‘effects of coronavirus’ include the effect on the worker, the employer or the wider economy. The regulations also provide that an employer may not refuse to allow a worker to take carried forward holiday on particular dates without ‘good reason’. Good reason is not defined in the regulations.
The guidance sets out a number of factors which should be considered when determining if it was reasonably practicable for a worker to take holiday, but these are fairly widely defined and will not always be easy to apply in practice.
Employers are encouraged ‘to do everything reasonably practicable to ensure the worker is able to take as much of their leave as possible in the year to which it relates’. This applies to all workers irrespective of whether they are on furlough or not.
For those workers who are furloughed the guidance states that they are unlikely to need to carry forward holiday, ‘as they will be able to take it during the furlough period.’ It is no coincidence that the guidance is published the day after the Chancellor announced the extension of the Coronavirus Job Retention Scheme (CJRS) until the end of October, albeit in a different form from August 2020 (see article on extension to the CJRS in this edition). However, despite the assumption that workers ‘will be able to’, whether they can actually take holiday during furlough depends not on how long the furlough period is for, but whether the holiday is in fact a period of rest, relaxation and leisure. This, as we have said above, depends on the particular circumstances.
Given that the period of lockdown began before the end of the financial year on 31 March 2020 (which for many workers is the same as the leave year), some workers may already have carried over statutory holiday that they were unable to take before they were furloughed. In terms of when that pre-lockdown carried over leave can be taken under the Amendment Regulations, the guidance states that workers should be allowed to take the holiday to which they are entitled in the new leave year before the ‘carried holiday’, as the carried holiday entitlement lasts for two years. It seems that ‘carried holiday’ is a term the guidance uses to refer to the leave carried over under the Amendment Regulations.
Although there is no requirement on employers to notify workers of their right to ‘carried holiday’, it is unlawful for employers to prevent workers from taking holiday which they are entitled to. As such, the guidance says it is best practice for employers to inform workers of the right to carry forward holiday and how much leave will be paid. It is also important to be aware that workers may also have a contractual right to carry over some holiday and the right to ‘carried holiday’ is in addition to any contractual rights.
There is no right to be paid in lieu of holidays not taken while still employed. The right to be paid for holiday not taken during employment, including ‘carried leave’, only applies on termination of employment.
The guidance, while clarifying some aspects of workers’ rights to holiday during furlough, does not provide a definitive answer to the question as to whether employers can insist holiday be taken. This is likely to be left to the employment tribunals to decide at some point in the future. Until then, workers will need to keep their own record of all holiday that is to be carried over and employers should ensure that they do not treat those on furlough any differently to those who are working for the employer. Managing leave is undoubtedly going to be an ongoing issue and employers who genuinely wish to resolve issues of managing leave during furlough would be best advised to negotiate with trade unions rather than reach individual arrangements.
You can read the government guidance on holidays in full here.
You can read the guidance on those who are shielding in full here.
You can the guidance on those who are clinically vulnerable in full here.
Articles shared by Thompsons relating to coronavirus (COVID-19) are correct at the time of publication. You should check the government's guidelines for the latest information and advice at https://www.gov.uk/coronavirus.