Employers: Holiday Pay related to COVID-19

The government has introduced a temporary new law allowing employees and workers to carry over up to 4 weeks’ paid holiday over a 2-year period. This law applies for any holiday the employee does not take because of coronavirus, for example if:

  • they’re self-isolating or too sick to take holiday before the end of their leave year
  • they’ve been temporarily sent home as there’s no work (‘laid off’ or ‘put on furlough’)
  • they’ve had to continue working and could not take paid holiday

Some employers will already have an agreement to carry over paid holiday. This law does not affect any agreements already in place.

If an employee or worker leaves their job or is dismissed during the 2-year period, any untaken paid holiday must be added to their final pay (‘paid in lieu’).

Employees who are unable to take all of their statutory annual leave entitlement in the current year will be able to carry it over into the next two years.

The amendment to the Working Time Regulations, which was announced on 27 March 2020, has been put in place to support employees unable to take time off during the Covid-19 (Coronavirus) pandemic and will apply to almost all workers, including agency workers, those who work irregular hours and workers on zero-hours contracts.

Employees will be able to carry over up to four weeks unused annual leave, which needs to be taken over the next two years, easing the requirements on employers to guarantee that staff take their full annual leave in the current year. This means employees can continue working against the Covid-19 (Coronavirus) pandemic without fear of losing out on annual leave entitlements.

The change is aimed at giving businesses under particular pressure from the impacts of Covid-19 the flexibility to better manage their workforce while protecting workers’ right to paid holiday. However, employers need to ensure employees take their transferred statutory entitlement within this time frame or they could face a penalty.