Managing Annual Holiday Entitlement in 2021

Managing Annual Holiday Entitlement in 2021. Step Two of the Governments Road Map to easing Lockdown Three Restrictions allowed campsites and holiday lets to reopen, in England, where indoor facilities are not shared with another household group and Step Three of the Roadmap permits UK holidays for groups of 6 or for a larger group where there are only 2 households in total. The Prime Minister is expected to make an announcement on or around 10 May 2021 about when foreign travel may resume. This means employees will now be starting to plan holidays for the summer or later in the year.


Updated guidance is released regularly and I will update this page as more details are announced.

This page was firstly published on 30 April 2021 and the last update was 4 May 2021.

Regardless of whether your employees have worked through the pandemic or been fully or part furloughed you will no doubt have a large amount of accrued but unused holiday entitlement that they now want to use. So how do you manage those requests and ensure you always have adequate staffing levels?

General Principles

The Working Time Regulations 1998 grant a statutory right to 5.6 weeks’ paid holiday each year. This consists of two elements:

  • 4 weeks holiday leave is derived from the Working Time Directive, and
  • 1.6 weeks additional leave is a UK legal right.

Typically, the statutory 4 weeks’ leave a worker is entitled to under EU law can only be taken in the year the worker was entitled to it, with exceptions in relation to sickness or maternity leave. Any leftover entitlement cannot be given as a payment in lieu unless the employment is terminated, therefore unused entitlement is lost. It is however possible to carry over 1.6 weeks into the following holiday year if mutually agreed by both parties.

There is also an obligation on employers to ensure that there is adequate opportunity for workers to take their holiday entitlement. Failure to do so could result in financial penalty.

Carry Over of Annual Holiday Entitlement

The amended Working Time Regulations allow workers, where it is not reasonably practicable for them to take some, or all, of the holiday they are entitled to due to Coronavirus, to carry over up to four weeks of their unused statutory holiday into the next two holiday years.

The rules are not restricted to certain industries or types of workers (for example, “key workers”). Instead, they simply require the worker to have been prevented from taking holiday because of coronavirus, including effects “on the worker, the employer or the wider economy or society”.

The carry-over is permitted into the two leave years immediately following the leave year in which it was due to be taken. So, if your holiday year runs from January to December employees would be able to carry unused holiday entitlement from the 2020 holiday year into the 2021 and 2022 holiday years and if your holiday year runs from April to March employees would be able to carry over unused entitlement from the 2020-21 holiday year into the 2021-22 and 2022-23 holiday years.

Furloughed Employees

The updated guidance clarifies circumstances in which the need to carry over holiday may arise and, helpfully, notes that employees on furlough are unlikely to need to carry forward statutory annual leave, as they will, in most cases, be able to take it during the furlough period. The guidance goes on to say, however that if, due to the impact of coronavirus on operations, the employer is unable to fund the difference between the furlough payment and ‘full’ holiday pay, then it is likely that this would make it not reasonably practicable for the employee to take their leave, thus enabling the worker to carry their annual leave forward. So, in short, if you are unable to Top Up pay to 100% for a ‘holiday’ period you must allow the employee to take (and be paid for) that period of holiday again at some point in the future.

Working Employees

The temporary changes ensured all employers affected by the Coronavirus through increased working hours and increased levels of sickness absence have the flexibility to allow workers to carry over holiday when granting annual holiday could leave them short-staffed. There needs to be some link back to the coronavirus pandemic to explain why the employee has not been able to take the holiday in question. In practice this test is going to be relatively easily met, since if both parties agree holiday should be carried over, there is going to be no one to dispute the necessary linkage back to the challenges created by the coronavirus.

Holiday Entitlement on Termination of Employment

It is acceptable to require an employee who is serving out their notice to use up some or all of their accrued holiday entitlement before the termination date.

You can insist by giving appropriate notice or because it is clearly expressed in the contract of employment that a worker takes any holiday owed to them as part of their notice period.

To eliminate or reduce significantly the cost of holiday on termination over the next couple of years build into your resignation acceptance letters that you may ask the employee to use accrued but unused holiday during the notice period.

Restrictions on Taking Annual Holiday Entitlement

Ordinarily, an employer can prevent annual leave being taken at certain times if the requisite notice formalities are met for instance restrictions on holidays during December are common in the hospitality and retail sectors.

The Coronavirus temporary amendments mean that an employer will only be able to require a worker not to take carried-over leave on particular days where they have a “good reason” to do so. “Good reason” for this purpose has not been defined, although genuine operational reasons are likely to be sufficient.

Enforced Holiday

Furloughed Employees

On 13 May 2020 the Government updated their holiday guidance to state that employers can force a furloughed employee to take a period of holiday.

This means if you are worried about a furloughed employee returning to work with an excessive amount of holiday you can ask them to take a period of holiday whilst they are furloughed. The required notice period is double the length of the holiday you require an employee to take i.e. for a period of 5 days holiday, you would need to provide 10 days’ notice.

The guidance goes on to say, however, ‘that where an employer requires an employee to take holiday while on furlough, the employer should consider whether any restrictions the employee is under, such as the need to socially distance or self-isolate, would prevent the employee from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday’. As such, whilst the government’s view is that you can require holidays to be taken during furlough, an employer requiring an employee to take a significant portion of their annual entitlement during ‘lockdown’ and particularly the more rigid version of ‘lockdown’ that was initially in place, could still face a challenge by way of an employment tribunal claim that they have not had the opportunity to enjoy their holiday. It is important to note that the government guidance, while persuasive, would not be binding on an employment tribunal.

Working Employees

In terms of the Working Time Regulations, you can give notice to a worker that they must take annual leave on specified dates. The notice must be at least twice the length of the period of leave that the worker is being ordered to take. So, if you want to insist on a worker taking two weeks’ leave, you must give at least four weeks’ notice.

Rather than issuing formal notice requiring workers to take holidays, there is also the option of asking workers to take a certain number of days holiday, or percentage of their holiday entitlement, by a specified date.

Cancelling an Employee’s Holiday

If you are short staffed or have an increased work load and don’t’ want employees to take holiday they had pre-booked you can cancel the holiday or request employees don’t take holiday on particular dates.

If you intend to cancel a period of holiday you must:

  • provide the employee with at least the length of holiday the employee had booked i.e. to cancel 5 days of holiday you would need to provide 5 days’ notice, and
  • have a good reason for the cancellation and act reasonably, including considering any financial loss to the employee if they are unable to take the holiday.

Failure to act reasonably would breach the duty of trust and confidence between you and your employee and would jeopardise the relations you have with the rest of your workforce.

Dealing With Multiple Holiday Requests For The Same Period

In terms of the Working Time Regulations, you can refuse a request for annual leave, provided you give as much notice as the amount of leave requested (so two weeks’ notice if two weeks’ leave is requested). However, many contracts of employment override this rule and state that an employee must comply with your holiday procedure, and that you can refuse requests. So, check the wording of your contract of employment and annual holiday policy.

Neutral criteria should always be applied when prioritising competing holiday requests e.g. first come first served; or by rotation (so if someone has been denied their request on a previous occasion, they then get priority the next time). If you have an annual leave policy, it could include details of how you will manage competing requests.

Strictly speaking, someone with a protected characteristic does not get automatic preference over someone without – but bear in mind the additional discrimination risk that could arise if you refuse a request to someone with protected rights (e.g. a female employee with primary childcare responsibilities who requests time off over the school holidays).

Dealing With An Employee Who Tests Positive For Covid-19 In Their Pre-travel Test

If an individual receives a positive result in their pre-travel test, they will not be permitted to travel and will be required to follow local rules and guidance for positive coronavirus cases in the country they are in – which are bound to require them to self-isolate for at least some time following the positive test result. This will necessarily delay their return to England and probably also their return to work.

If the employee is sufficiently unwell that they are not capable of work, they should of course be treated as on sick leave and would be entitled to SSP (and potentially company sick pay, if applicable). If the employee is well enough to work, but is unable to work due to the self-isolation requirement (i.e. if remote working is not possible in the employee’s role or at least not in their current location/circumstances, or is not permitted by the employer), they would be deemed to be incapable of work and therefore entitled to SSP for 11 days starting on the earlier of the date the employee started showing symptoms or the date the test was taken. If symptoms continue beyond those 11 days, SSP entitlement is extended accordingly.

Since a pre-travel test can be taken up to two days before they travel, it is worth noting that employees may receive a positive test result and have to begin self-isolating some time before they are actually due to return to work. In these circumstances, employees may seek to reclassify affected days of their annual leave as sickness absence.

Dealing With An Employee Who Has To Self-isolate During Or Shortly Before A Period Of Pre-booked Holiday

Employees are legally entitled to reclassify holiday/the balance of a holiday during which they become ill as sick leave, and are also entitled to do so where they become ill before a period of booked holiday so that their sick leave would coincide with their holiday. (This is based on case law which establishes that the purpose of annual leave (rest and relaxation) is different from and incompatible with the purpose of sick leave (recovery from illness).) This entitlement applies only to holiday that is part of the 4 weeks minimum annual leave under the Working Time Directive (WTD). However, it can be difficult to distinguish the WTD part of an employee’s holiday, and there can be other administrative difficulties, so employers often apply these and other principles relating to the interaction of holiday and sickness to all of an employee’s holiday entitlement.

In current circumstances, employers may face employees having to self-isolate. If such periods of self-isolation coincide with employees’ booked annual leave, employees may ask to reclassify that leave as sick leave, particularly if the employer pays company sick pay. You would then have to consider, as set out above, the legal position and what your company policies say to ensure that you respond appropriately.

In the context of the pandemic, it is worth noting that there is a potential distinction to be drawn between employees who actually have Covid-19 and those who do not have Covid-19 themselves but are self-isolating as a close contact of someone who does or who are simply awaiting the results of a post travel test or quarantining where required following international travel.

Where an employee actually has Covid-19, they should have the same right to reclassify holiday as sickness as other ill employees would have.

Where an employee is required to self-isolate not because they actually have Covid-19 but because they are a contact of someone who does, the employee will, assuming they are unable to work remotely from the place where they are self-isolating, be deemed to be entitled to SSP. However, it is less clear whether they would fall within the scope of the case law on reclassifying holiday as sickness absence. The purpose of a period of self-isolation for close contacts is to prevent the spread of Covid-19, rather than to allow recovery from illness. However, the employee would argue that a requirement not to leave the place where they are self-isolating is equally incompatible with the rest and relaxation purpose of annual leave. This is a question that may need to be determined by employment tribunals going forwards. For now, however, if you are faced with such an issue, you may want to take advice on your particular circumstances.

As explained above, employees who are self-isolating while they await the results of a post travel test or quarantining if required following international travel are not entitled to SSP. In such cases, there is therefore a stronger argument that the employee’s position is different from an employee who is unwell and the right to reclassify holiday as sickness absence should not apply. As discussed above, you will need to be clear as to the approach you will take to periods of post-travel quarantine (e.g. whether employees will be required to take additional annual leave, or unpaid leave to cover this).

Template Holiday Request Form

My Holiday Request From has been updated to allow the employee to notify you if they will be travelling abroad while they are on holiday and if so which country or countries they will be visiting, this will allow you to identify which employees, if any, will be affected if the Government move a Country from the Green List to the Amber or Red List while an employee is away.

HR Toolkit: Holiday Entitlement
Ready To Go HR Department - policies image

My HR toolkit: Holiday Entitlement provides an essential toolkit with practical guidance, meeting scripts and template letters to enable you to manage holiday entitlement within your business fairly and consistently.

My HR Toolkit: Holiday Entitlement will take you step by step through the statutory entitlement and explains the processes you will need to implement so you remain legally compliant and will deal with holiday matters fairly and consistently.

The guidance notes are supported by forms, letters, check-lists and how to guides so you can relax in the knowledge that everything to do with holiday entitlement is done properly, efficiently and compliantly in a professional, friendly and knowledgeable way.

When you buy My HR Toolkit: Holiday Entitlement will receive access to:

  • Model Holiday Policy – clearly written and communicated policies are your best defence against tribunal claims.
  • Forms and Letters – are templates which are fully editable by you and have clear prompts where information should be added.
  • How to Guides – provide practical solutions to common Holiday headaches.

My HR Toolkit: Holiday Entitlement folder contains a range of guidance and resources to help you manage employees holiday entitlement. I also provide a model policy and a template holiday request form and a range of How to Guides that deal with unusual situations such as when an employee who goes ahead with a holiday when annual leave has not been authorised.

Tap into and share the Kea world!

Don’t forget to add Kea to your social networks and when you read an article that you like share it with your network!

Managing Annual Holiday Entitlement in 2021