How to deal with holiday that is not used and what are the rules with carry forward of leave.
For those of you whose annual leave year ends on 31st December, there is probably a flurry of activity with staff trying to use up their outstanding annual leave before they lose it.
But what are the rules around ‘use it or lose it’? And when are staff allowed to carry over annual leave and how much?
Let’s start by looking at leave and leave entitlements.
There are 3 types of leave: statutory EU law, statutory UK law and contractual leave.
The statutory annual leave allocation is 28 days or 5.6 weeks (for those working a 5-day week). This is made up of 4 weeks (20 days) derived from EU law and 1.6 weeks (8 days) from UK law. The 8 days can include public and bank holidays and doesn’t have to be paid. In addition to the 5.6 weeks, companies can decide to give additional ‘contractual’ leave.
Statutory leave: 4 weeks (20 days) derived from EU law
Additional leave: 1.6 weeks (8 days) doesn’t have to be paid – derived from UK law
Contractual leave – anything above 28 days that the company wishes to give.
The right to leave, how it is calculated and when it can be used is covered by The Working Time Regulations 1998 (WTR).
What are the rules around ‘use it or lose it’?
Firstly, the WTR are very clear that your staff must take the 20 statutory days within the leave year to which they are allocated. These cannot be carried forward to the next leave year and cannot be paid unless on termination of employment.
The 1.6 weeks’ leave (UK law) does not have to be used within the leave year and can be carried over at the discretion of the company or as agreed in the employment contract. It also cannot be paid unless on termination.
The contractual leave can also be carried over if agreed by the company. The company does not have to allow a carry forward over the 20 days and many companies use the 1.6 weeks to cover the bank/public holidays.
Exceptions to the carry forward rule.
There are 3 exceptions to when the 20 statutory days can or may be carried forward to the next leave year.
Firstly, when an individual has been absent from work due to long term sickness and is not willing or able to use their annual leave during their sickness absence.
Secondly, employers may allow it when a female has been unable to take it due to being on maternity leave. This is a less risky option than informing her that she has lost all her accrued leave.
The third exception may be where an individual has not actually been given the chance to take their leave. This may be where strict restrictions have been imposed or leave has not been allowed by the employer.
What should employers be doing?
1. Check your annual leave policy/rule on what it says about carry forward?
Employers should check their policy/rules to see what they say about carry forward. If you only give statutory leave, it is likely that no carry forward should be allowed. However, if you give an amount in addition to the 28 days, then at your discretion you may wish to allow a carry forward.
2. Ensure your staff take their leave
Employers are not required to “force” employees to take holidays, but they must be able to show that they have “exercised all due diligence in enabling” the employee to take holidays.
You should inform them of their holiday entitlement and encourage them to take all their holidays.
3. What else can you do?
Have a clear Annual Leave Policy/rules setting out when the leave year is, what the entitlement is and what the rule is for carry forward of leave and how much. Include any company shutdown days where staff have to reserve an amount of their entitlement.
Encourage staff to take leave throughout the year. As well as looking after their well-being and ensuring adequate rest, it also avoids staff have a build up of leave at the end of the year. Send regular reminders, especially towards the end of the leave year, whether that is December, March or any other time.
If you have a company shutdown, for example at Christmas and New Year, ensure staff know how much leave to ‘reserve’ for this.
You may wish to use a cloud-based or computerised system that allows staff to see their leave entitlement and how much they are left to use.
If you would like any help and advice around annual leave or having an Annual Leave Policy, Hill HR Consultancy would be happy to help.
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