Last reviewed 23 December 2020
Many companies may operate a January to December leave year and, with the end of 2020 in sight, time may be running out for employees to take their leave. Ben McCarthy, employment law writer at Croner-i, explores whether employers should permit their employees to carry leave over into the next leave year.
As a company heads towards the end of its leave year, it may become apparent that some employees have not taken all of their holiday allowance and, as a result, wish to carry this over into the next year. This issue may be particularly common during the run up to Christmas. Although employers are free to choose which 12-month period will serve as the company’s leave year, many companies either set this from January to December or April to March. There could be a number of reasons why employees do not make use of their holiday entitlements. For example, it could be that they felt they couldn’t afford to spend as much time away from their work, or may have even forgot to book it until it was too late. On the other hand, the individual concerned may have been on long-term sick leave.
There is also the coronavirus pandemic to consider. Staff may not have been in a position to take their leave, potentially due to the demands of their role or being furloughed. While furloughed staff can still take annual leave, the company may have not been able to fund paying them their full wages, meaning they have lots of leave left to take.
Whatever the reason, employers may be happy at the prospect of employees taking less leave in one year. That said, there are certain legal implications associated with permitting this practice that business-owners must be aware of.
Legal entitlement to take leave
The first thing that employers should know is that, generally, employees do not have the legal right to carry over leave just because they want to, apart from in specific circumstances. In the UK, all employees have a statutory minimum paid leave entitlement that is set at 5.6 working weeks. This calculates as 28 days’ paid annual leave for those working five days per week and is pro-rated down for part-time workers. As provided by the Working Time Regulations 1998, four weeks’ of leave, which equates to 20 days for someone who works five days a week, is attached exclusively to the year in which it is accrued. In other words, usually these four weeks cannot be carried over into the next leave year. On the flip side, the remainder of the minimum yearly entitlement, which is 1.6 weeks for a five-day a week worker, can be carried over to the next leave year provided such an arrangement is agreed with the employer. Any additional, contractual leave can also be carried over.
To put this into perspective, a company may offer 25 days of holiday per leave year plus the eight additional bank holidays. The law usually dictates that 20 of these days must be taken in that particular leave year in order to preserve the health and wellbeing of employees. However, the company can then agree to let the remainder of the holiday entitlement be carried over to the next leave year if it so wishes. This option should be specifically stated either in the contract of employment or as part of a separate agreement. If the contract of employment, or company handbook, allows for leave to be carried over but the company fails to permit it when asked, it could face a claim for breach of contract.
The law has also changed slightly as a result of the coronavirus. Due to the challenges posed by the pandemic, the Government has changed the law surrounding the taking of annual leave. If it has not been “reasonably practicable” for employees to take their leave as a result of the pandemic, they can carry up to four weeks of this leave over to the next two leave years.
Government guidance outlines that, when considering whether it was not reasonably practicable to take these weeks, you 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.
The impact of family and sick leave
The legal situation does change slightly if an employee has been away from work due to sickness or maternity leave. Holiday entitlement continues to accrue during periods of sickness and if a worker is unable to use it in the given leave year, then court rulings on the topic say that employees can carry over their leave. Here, the normal situation is turned on its head and the individual would be able to carry over the four-week leave period that is not normally permitted to be carried over. However, they would not be able to take any additional time into the next leave year unless the employer permitted it. Further court rulings say that leave carried forward due to sick leave must be taken in the 18-month period following the leave year in question, after which it is lost. In contrast to this, if an employee has taken her full right to 52 weeks of maternity leave, she would be able to carry all of her allocated leave over.
Should alternatives be considered?
Often organisations will not allow holidays to be carried forward into the next holiday year and although employers may be tempted to allow leave carry overs in order to avoid employee disputes, they should be wary. In the absence of a contractual provision that permits this, granting additional annual leave to one employee can cause unrest among a workforce and potentially lead to claims of preferential treatment. It could also result in a member of staff taking prolonged periods away from work when they are needed. The prospect of extended time off in the next leave year could very well leave employers short staffed and unable to meet customer demand. This is also something that should be borne in mind for coronavirus leave — as it can be carried forward into the next two leave years, this time should be carefully spread out if possible.
In the absence of the need to permit carry-over as a result of the pandemic, it is therefore highly advisable to encourage employees to take all leave they are entitled to in one leave year in order to avoid dispute further down the road. They should be regularly reminded about the leave they have left to take and when any requests must be submitted by, otherwise known as the “use it or lose it” approach. This will help avoid a scenario where competing staff rush to cram in their remaining holidays towards the end of the leave year. If the employer would rather their employee takes the leave in the relevant leave year, they can also consider requiring them to take this time on a specific date. This should be done by giving notice that is double the length of the leave in question; if an employer wanted to enforce two days’ annual leave, they must give the employee at least four days’ notice.
Remember that there may be situations where employees feel their workload is too big to take time away from it. Here, employers should ensure support systems are in place to reassure staff that their work will be fully handled in their absence, such as clearly indicating how their ongoing tasks will be allocated to the rest of the team. If this is a recurring issue, it may be that work distribution procedures need to be evaluated.
Carrying over leave can be a difficult area for employers to explore and it is not something that they should approach lightly. If employers find that a number of staff are regularly failing to use their annual leave entitlement then there may be additional issues to consider. This could be an indication of presenteeism, in which staff resist taking time off due to excessive work commitments, and employers should look to address this in order to guarantee a more beneficial work-life balance.
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