Annual Leave FAQ’s

We often receive queries from clients about annual leave problems. In this issue of our Employment Update, we answer your most frequently asked questions.

Q1. I have an employee who is off on long-term sick leave are they able to carry over their unused annual leave to the next annual leave year?

The short answer to this is yes. The European Court of Justice (ECJ) has ruled that a worker on long-term sick leave who is unable or unwilling to take statutory annual leave may be permitted to carry over that leave into a subsequent year. As to how long they can carry this over for, following a series of cases dealing with this very issue  it now seems likely that 18 months ( from the end of the relevant leave year) will be adopted by employers as a sensible period of carry over when an employee is on long term sick leave.  

Q2. I have a number of employees who at the end of each annual leave period have not used all of their holiday entitlement. Do I have to remind them that they should take this time off or will it lapse?

The recent ECJ cases of Max-Planck Gesellschaft zur Forderung der Wissenscheaften eV v Shimizu and Kreuziger v Berlin, which were decided at the same time, highlighted the need for employees to be given an effective opportunity to take their annual leave. As a result, it is for an employer to show that they have warned their employees that they should take any outstanding leave, to avoid the risk of losing that leave at the end of the annual leave year.

The ECJ in the above cases pointed out that as the employee is the weaker party in the employment relationship, the employer must not restrict their rights.  In particular, they should not be deterred from exercising their right to take annual leave by the possibility of suffering detrimental consequences, nor should they be offered any incentive or encouragement not to take their leave. 

In order for an employer to show that it has met its obligations, the ECJ recommends that the employer should take positive steps to encourage employees to take annual leave such as ensuring employees have the opportunity to take their annual leave, even if you have to encourage them formally. Make sure you inform employees in good time, and in writing as evidence, that if they do not take their annual leave when it is coming to the end of the period for them to do so.  Ensure you have a clear “use it or lose it” policy, that there is a clear procedure for booking annual leave and that everyone is aware of this procedure. 

Q3. I have an employee who has been off on sick leave for 8 months. They have accrued a large amount of annual leave and have asked me if I can make a lump sum payment to them in lieu of the holiday. Can I make this payment?

Payments in lieu of annual leave are not allowed to be made during employment. Statutory holiday entitlement cannot be replaced by a payment in lieu, other than in circumstances where an employee’s employment is terminated (Regulation 13 (9) WTR). Therefore, it would be a breach of this legislation to pay the employee rather than allow them to take their annual leave.

The other option of course is to given the employee the choice to take the annual leave while they are on sick leave and then he will be paid for it. However, this is only really worthwhile if the employee is not getting sick pay.

Q4. I want to reward employees with long service with additional days annual leave but I am concerned that this may indirectly discriminate against younger employees who do not have established length of service and so will not be entitled to the same benefit. Can I do this?

Having an arrangement where employee’s annual leave entitlement increases with length of service is not unusual. These arrangements are usually contractual and work with an employee having a certain level of leave, which increases after say 5 years. Although these arrangements are common, could they be indirectly discriminatory on the grounds of age?

Age discrimination in employment is prohibited under the Equality Act 2010. Therefore, an employer must not (without justification) discriminate (directly or indirectly) against an employee because of age in respect of their terms of employment or by subjecting them to any other detriment. Indirect discrimination could arise if an employer’s increases annual leave for longer serving employees. If an employee’s contract provides that annual leave will increase after ten years’ service for example, this may be indirectly discriminatory because younger employees are much less likely than older employees to have ten years’ service, the longer the service required then the greater the chances of younger employees being at a disadvantage.

Schedule 9, Paragraph 10 of the Equality Act 2010 contains an exception to deal with this very issue to allow employers to reward length of service, even if it does disadvantage younger employees. This exception enables employers to treat employees differently with respect to awarding benefits if the reason for the difference in the treatment is that the disadvantaged employee has less than five years’ service. In respect of employees who have more than five years’ service and are put at a disadvantage by the service requirement, then an employer has to show that it ‘reasonably appears’ to it that imposing the length of service requirement  ‘fulfils a business need.’ In these circumstances the requirements to objectively justify such practice are less onerous that in most other cases of indirect discrimination.

Q5.  If an employee suffers a bereavement, do I have to give them time off work or can I make them take some bereavement leave from their annual leave entitlement?

At present, there is no right to take paid time off due to a bereavement. Many employers will have their own compassionate leave policy to govern the issue of the time off that can be taken do deal with this. If the time off required exceeds that which is provided for by the policy then you will have to consider this on a case by case basis. Everyone deals with grief differently. Be mindful of the longer-term consequences following the trauma of the death of a loved one. Mental Health issues such as depression and PTSD can be long term medical problems and may amount to a disability under the Equality Act 2010. Be compassionate and see what you can do to support an employee on their return to work following a bereavement, perhaps you can offer flexible working or a phased return to work.

From 6 April 2020, however this is going to change in some cases with the introduction of the Parental Bereavement Pay (General) Regulations 2020.  This means that an employee who loses a child under the age of 18, or suffers a stillbirth after 24 weeks of pregnancy, will be entitled to two weeks’ statutory leave to be taken in one block or as two separate blocks of a week. The leave will be paid for employees who have at least 26 weeks’ service and who meet minimum earnings criteria. Statutory parental bereavement pay will be paid at the same rate as statutory paternity pay (£151.20 from April 2020) or 90% of weekly earnings if lower.  

Q6. I have received a request for annual leave from an employee, at what is my company’s busiest time of my year. I would therefore normally refuse such a request. However, their request relates to the employees requirement to observe a religious festival. What should I do?

There is no legal requirement for an employee to give a reason why they want to take a holiday. However, if they do state that the reason they wish to take their annual leave relates to a religion and belief, and permission is refused, then, as an employer you must be able to justify your decision by reference to reasons unrelated to the employer’s religion or belief. In other words, any refusal must be a proportionate means of achieving a legitimate aim. Discrimination (either direct or indirect) and harassment in the workplace because of religion or belief is unlawful under the Equality Act 2010. Having a clear policy in place in respect of the timings of holidays and the processing of holiday requests will assist you in these situations.  

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