How to manage holiday entitlement as businesses return after lockdown

  • 15 Jul 2020
This content was last updated 28 April 2021.

Businesses need to act now to ensure they do not end up with large numbers of staff taking holiday at the same time, writes Nick Martindale

Getting back up and running in as safe a manner as possible may be the priority for small business owners just now, but they are also being urged to ensure they are not hit by a wave of employees seeking to take holiday later in the year.


“This is a real issue for businesses across the country,” says Steve Arnold, CEO of absence management software firm e-days. “We’re seeing a lot of cancelled holiday on our systems, meaning that employees are ‘banking’ leave for when it’s easier to travel either abroad or domestically.” A snap-survey run by the company on LinkedIn suggests 61 per cent of employees have saved up their holiday allowance.

For small firms in particular, this could be bad news. Employees may well prefer to take holiday at a time when they are allowed to travel and visit attractions, but firms struggling in the wake of the pandemic can ill-afford to have staff off work just as business starts to pick up again.

Fortunately, there are ways in which firms can manage this, with a bit of planning. Legally, employers are able to compel staff to take annual leave, says Charlotte Geesin, head of employment law and business immigration at law firm Howarths, and this includes those currently on furlough leave. “Provided an employer gives an employee notice to take annual leave which is twice in length as the holiday to be taken, then an employee cannot readily raise any challenge to this,” she says.

“Holiday must be paid at 100 per cent of an employee pay, but any holiday which an employer compels a furloughed employee to take can, in some cases, still attract the 80 per cent contribution from the Government (which is due to drop monthly from 1 July 2021).”

Employers can also legitimately reject new annual leave requests or ask an employee to cancel pre-booked annual leave, if they give the employee notice which is at least the length of the annual leave, as long as they have genuine operational reasons for doing so, she adds.

“Although under employment law, employers are able to tell employees when exactly they must take their holiday subject to giving the correct notice (or where the employment contract already specifies this), dictating when annual leave is to be taken could potentially lead to staff resentment,” says Hannah Thomas, employment solicitor at FSB Employment Protection

“For this reason, employers may choose to encourage employees to use up their annual leave in the leave year to which it relates or in accordance with any provisions on holiday carry over in the first instance, rather than specify the dates on which this must be taken to begin with.”

Employers can choose to do this in a number of ways, explains Thomas, for example by reminding staff of any annual leave entitlement left, or asking staff to take their remaining annual leave by a certain date, so that employees have some flexibility around when the annual leave is taken, but enforce the leave if employees still fail to request holiday and have a significant amount still to take at a time which may not be convenient for the employer.


The Government has also introduced changes to the Working Time Directive that will allow some staff to defer holiday over the next two years. “This allows basic minimum holiday which has been untaken due to Covid-19 issues to be carried over for up to two holiday years after the employer’s current holiday year,” says Emma O’Connor, head of training at law firm Boyes Turner.

“However, this will not apply to any additional Working Time Regulations 1998 holiday or any contractual holiday. The employer may already have provisions in its contract of employment to allow for carry-over, or this might be something they want to agree temporarily with their workforce.” More information on this can be found on the Government’s website.

But deferring holiday until next year can create other issues. “If employees or workers – remembering that holiday entitlement is not just an employee right – leave employment, any accrued but untaken holiday calculated to the termination date will have to be paid by the employer,” says O’Connor. “Holiday pay as we know is paid at normal wage rates (so pre-furlough pay). This could be a huge financial burden for employers at a time when they are looking to balance their books.”

Then there’s the wellbeing of staff to consider. “Many people’s mental health has been severely affected by the lockdown and the wider impacts of Covid-19,” points out Arnold. “Whether staff are continuing to work from home for the time being or returning to a physical place of work, it’s highly likely that a majority are in need of a break. Without one, especially given current pressures, businesses are at risk of having workers signed off sick – not with Covid-19, but from burnout.”


Dr Nerina Ramlakhan, sleep and energy specialist, and author of Tired But Wired, says employers need to be on the lookout for indications that staff may be struggling; which itself may be harder to do as more people work remotely.

“Signs of burnout can include feeling increasingly disenchanted and cynical about work or being unable to summon up the energy to get the job done,” she says. “After time, burnout can lead to a deterioration of lifestyle habits such as a lack of exercise, poor nutrition or even using food, alcohol or drugs to feel better or numb out feelings.” Other warning signs are irritation, anger, impatience with colleagues, social withdrawal, feeling exhausted, drained, hopeless and lacking in optimism, she adds.

Employers need to conduct an initial audit of workforce holiday, says O’Connor: “Who has what accrued, who has taken what and what holiday is left to be taken until the end of the holiday year. This will also help with workforce planning, particularly, as we move to the end of the full government funding of the Job Retention Scheme.”

Then it’s a case of working out how to ensure holiday is being taken in an appropriate manner. “The best advice I can give would be to make proper and strategic use of the legislation which permits the compelling or cancellation of annual leave and the rollover provisions,” says Geesin. “Without a doubt, this is the best way to manage both operational and financial obligations and liabilities.”

Nick Martindale is editor of First Voice

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