As Christmas draws closer, many of you will be approaching your holiday year end and this is therefore an appropriate time to highlight those tricky areas surrounding the holiday carry over rules of which you need to be aware.
A worker is entitled to 5.6 weeks annual leave in each year (28 days for a full time worker), made up of four weeks under EU law (20 days for a full time worker) and 1.6 weeks under UK law (8 days for a full time worker). Although there is generally no legal obligation to do so, some employers allow workers to carry forward untaken holiday to the next holiday year.
Long term sickness absence and holiday accrual
But what happens when a worker is unable or unwilling to take this leave whilst on sick leave?
Well, is has been established by case law that a worker in this situation does not lose the 20 days EU holiday rather, any of this leave that is untaken is carried over into the next holiday year. The concern for employers was whether this carry over of up to 20 days per year was allowed to continue year on year.
The Employment Appeal Tribunal recently held that the maximum period for which holiday could be carried over was 18 months from the end of the leave year in which the annual leave arose. For example if a worker was sick from April 2011 until a termination date in February 2015, they would be entitled to a payment in lieu on termination in respect of untaken leave in the 2013, 2014 and 2015 holiday years but would lose any untaken leave accrued in 2011 and 2012.
Whilst this does provide some comfort, employers must bear in mind that case law decisions only relate to the 20 days European statutory leave and not the additional 8 days UK statutory leave or any extra leave provided for in the employment contract. Furthermore, the EAT has granted permission for an appeal to the Court of Appeal in respect of the holiday lost in 2011 and 2012, so the position could change.
For now though, employers should be confident in adopting an 18 month “use it or lose it” approach.
Questions have been raised about whether the new regulations that limit backdated holiday claims to two years from the date of deduction may assist employers in these scenarios. However it is unlikely to because payment cannot be made in lieu of holiday unless the employment has been terminated, therefore any claims by employees for unpaid holiday can only be made on when the employment ends.
Employers should be aware that the case of The Sash Window Workshop Ltd & Anor v King UKEAT/0057/14 clarified that the carry over rule will also apply if a worker is not sick but is nevertheless unable or unwilling to take their holiday entitlement due to reasons beyond their control, including for example, where their holiday request is refused or family friendly leave.
Family Friendly Leave and Carry Over
To summarise, workers are entitled to accrue holiday in the normal way whilst on family leave.
This can cause practical difficulties, for example in deciding when the worker should take their leave. Often, particularly with shared parental, maternity or adoption leave, it will span two leave years. It is not always possible for the worker to use up their annual leave for the current year before going on family leave and indeed, you could risk the employee having had too much paid holiday if they resign or are dismissed before the end of year. It is sensible to have written policies in place that deal with the inter-relationship between holiday entitlement and the timing of periods of statutory family related leave and to review them on a regular basis.
It is very likely that those on family leave can carry forward all accrued untaken holiday because UK law provides that all contractual terms (save for the right to be paid salary/wages) continue during family leave, including the accrual of holiday. Preventing someone from taking their holiday entitlement because they have taken a period of family leave could lead to a discrimination claim on grounds of sex for example.
It would seem to follow that the comments relating to carry over above would also apply to family leave, i.e. 18 months from the end of the leave year in which the annual leave arose.
Calculation of Holiday Pay
The long running case of British Gas Trading Ltd v Lock and another was heard on 8 and 9 December and we will be reporting to you with the Judgment as soon as it is issued.
Contact your usual adviser in the team to discuss how we can help you ensure that your business is legally compliant. Visit www.morrlaw.com/employment-law/ for more information.