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The great holiday carry over and how to solve it

The closer  year end gets, the more I am asked about high levels of outstanding holiday entitlement. This year, I expect the issue to be much worse than usual.  With high levels of unused entitlement carried over from COVID and difficulties recruiting, I can foresee panic stations ahead.

Please note, for ease, the figures in this blog are based on an employee working 5 days per week.  If your employee works less than 5 days per week, the figures should be calculated pro-rata.

What is the Statutory Holiday Entitlement?

Employees are entitled to 5.6 weeks’ holiday per year.  This is made up of:

• four weeks set by the EU
• an additional 1.6 weeks set by the UK Government.

For employees working 5 days per week, this equates to 28 days per year (including bank holidays, if applicable).  There is no automatic right to take the 8 bank holidays off.  For many they will be a normal working day.

Can you carry over unused entitlement?

Employees should be encouraged to take at least 28 days’ holiday per year.  To demonstrate you have done this, send reminders throughout the year.

The four weeks of EU holiday entitlement must be used in a single leave year.  You can agree to carry over other holiday entitlement if you wish.   However, you have no obligation to do this provided you have given reasonable opportunity for them to take their leave (unless see * below).  If you do allow leave to be carried over, set a limit on the number of days and when they must be used by.   Otherwise, it can get out of hand.

What if someone is on leave?

When someone is on any form of leave, they continue to accrue holiday entitlement, as if they were at work.  This includes maternity leave, adoption leave and long term sickness.  *If they do not have the opportunity to take the leave in that holiday year because of a long-term absence, it must be carried forward to the next.

COVID and carrying over holiday entitlement

In 2020, the Government recognised that many people would not be able to take their holiday entitlement due to COVID.  Some employees were on furlough and their employers did not require them to take leave and others were too busy to the take the time off.

Because of these difficulties, a law was brought in allowing employers to agree to up to 20 days’ holiday entitlement being carried over for the next 2 years.  It has to be stressed, this was the employers’ decision whether to allow this, it was not an entitlement.  It should only have been offered to people who were not able to take their holiday entitlement due to COVID.

Unfortunately, as we approach the end of that second holiday year, many have still not caught up.

Can I pay employees for unused holiday entitlement?

You can only pay employees for unused holiday entitlement in the following circumstances:

• With their agreement, for any extra contractual holiday that you give.
• When they are leaving your employment.

What can I do now?

Unless there is something in your contract that says otherwise, you may adopt the attitude of “use it or lose it”. However, this may lead to some very upset staff.  You should therefore consider the following:

• Are there any opportunities to bring down the amount of outstanding holiday before your year end?  If you want to require someone to take annual leave you can do so, provided you give twice as much notice as the amount of time you require them to take off.
• Does any of the entitlement relate to additional, contractual days? If so, should you offer to pay this instead?
• Do you want to allow some to be carried over into the next holiday year. If so, set a limit on both the amount and the time by which to take it.  Be clear, if they have not taken it by then, they will lose it.  Make sure you send further prompts before your deadline to remind them to book the holiday.

If this is an issue for you, the sooner you start to act, the better.  Please contact me if you would like to discuss this further.