Introduction

With the end of the year fast approaching, we are receiving an increasing number of calls about untaken annual leave. Therefore, it may be helpful to outline the current position for employers and explore how any outstanding leave can be managed appropriately.

Statutory leave entitlements

Under the Working Time Regulations (WTR) 1998 there are two types of statutory leave entitlement:

  • Regulation 13 leave – four weeks basic entitlement (20 days for a full-time worker); and
  • Regulation 13a leave – 1.6 weeks additional entitlement (8 days for a full-time worker)

Regulation 13a leave is provided in UK law to include bank/public holidays into the statutory entitlement. Employers may also provide additional contractual leave if they wish to do so.

How leave is taken

In law, the different types of leave are taken in the following order:

  • Your four weeks basic entitlement is taken first; followed by your 1.6 weeks additional entitlement; and finally, any further contractual leave entitlement

This means that for many of us, our first day of holiday in any leave year (January to December) is New Year’s Day. This is a bank/public holiday but, if you do take it as leave, it does come out of the basic four week entitlement.

Carry over of leave

Before the government amended the WTR 1998 due to the Covid-19 pandemic, the four weeks basic entitlement had to be taken in the leave year in which it was accrued, except under exceptional circumstances such as maternity and long term illness. The 1.6 weeks additional leave, however, has always been able to be carried over into the following leave year, providing it is used within that year. Rules regarding the carryover of any additional contractual leave are governed by the terms of the employee’s contract and is often at the company’s discretion.

Following an amendment for Covid-19, the WTR 1998 now permits a carry over of the four weeks basic leave entitlement into the next two leave years. This is providing that it cannot be used within the current leave year because of the pandemic.

The implications

The prospect of having people carry over leave into subsequent years could be perceived as a managerial and administrative nightmare. There are options, however, and it is important to remember how leave is taken as above.

The two year carry over provision applies only to the basic four weeks entitlement, so employers must track how much of that leave has been taken in the year, including bank/public holidays. As of November, employees are likely to have only taken six days of leave, assuming they were paid full pay for them. These days are likely to be:

  • New Year’s Day, Good Friday, Easter Monday, May Day, Spring Bank Holiday and the Late Summer Bank Holidays

This leaves two weeks and four days to take during the year that, if untaken due to the Covid-19 pandemic, may be carried over into the next two years.

Your obligations

Employers have an obligation to ensure that their employees are taking their leave and getting the rest and leisure time that they are entitled to. Relying on a ‘use it or lose it’ provision is not sufficient. By not proactively managing the booking of leave during the year, some employers are failing to comply with their obligations under the WTR 1998.

Your options

Under regulation 15 of the WTR 1998, employers can give notice to employees instructing them to take annual leave at a time that suits the employer. This is not a request and providing that the notice given is double that of the time being taken, the employee has no right to refuse.

Given the example provided in ‘The implications’ section, an employer could give one month’s notice to enforce a period of two weeks leave before Christmas. When including the two bank holidays for Christmas Day and Boxing Day (which is on Monday 28th this year), this means only two days of the basic four weeks entitlement can be carried over into the next two years.

Before the start of the new leave year, employers can stipulate that for the coming year certain amounts of leave must be taken at certain times, or that proportions of leave must be taken by certain points in the year. For example:

  • One week per quarter and at least one period of two weeks to be taken consecutively; or
  • ¼ of the total entitlement for the year must be taken by the end of March, June, September, and December

Payment in lieu of annual leave

It is unlawful to pay in lieu of annual leave except on termination of employment. The right in law is to the paid time off and not the holiday pay alone. Employers cannot buy their employees out of their statutory right to paid time off during the year, even if they ask to do so. There may be more leeway with contractual leave, such as with holiday buy back schemes, but these are usually agreed at the start of the leave year. Employers should be careful about setting precedents that undermine the purpose of the leave, i.e. to rest and enjoy leisure time.

Engagement is key

ACAS and government guidance states that employers should be flexible and understanding of their people’s leave requirements and work with them to ensure they are taking their entitled time off. As an employer, you should talk to your employees and identify any leave that must be carried over. You must then manage this entitlement effectively to prevent any knock-on issues occurring in the future.

If you would like any further guidance on managing untaken annual leave, please call us on 0345 076 2288 or send us an email.