The fundamental principle behind holiday pay is that a worker should receive pay when they are on holiday to reflect pay that they would have received had they been at work and working. The pay a worker receives will depend on how many hours they work, and how they are paid for those hours. Holiday pay for those on furlough and also for those who aren’t, should be calculated in alignment with current legislation and based on a worker’s usual earnings. Where a worker has regular hours and pay, holiday pay is calculated on these hours but if they have variable hours or pay, then the holiday pay is calculated using an average of the previous 52-weeks’ worth of remuneration. Weeks in which there was no remuneration are discounted from the calculation. Where workers are furloughed and taking annual leave, the employer must still calculate and pay holiday pay in accordance with legislation. If this is above the amount that employees receive while on furlough, then the employer must pay the difference but can continue to claim the 80% grant from the government to cover some of the cost of the holiday pay.
Carrying annual leave forward
The 5.6 weeks of statutory holiday is split out into four weeks and 1,6 weeks and there are differences in the rules that apply. 1.6 weeks can be carried forward into the following leave year where there is a written agreement between the worker and the employer. Four weeks, however, cannot be carried into future leave years so these weeks must be taken within the year. In some scenarios, employers must allow the four weeks entitlement to be carried into future leave years. If a worker cannot take annual leave as they are on maternity leave or off sick, they are entitled to carry their annual leave forwards. These rights remain irrespective of whether a worker is furloughed or not. The government has passed new emergency legislation - The Working Time (Coronavirus) (Amendment) Regulations 2020, laid before Parliament on 27 March 2020) - which will mean that workers will be able to carry holiday forward where the impact of coronavirus has meant that it has not been reasonably practicable for them to take it in the leave year to which it relates. This applies to the four weeks’ worth of holiday, and it can be carried forward to the following two leave years. When calculating what holiday a worker can carry forwards, employers must give workers the opportunity take any leave that they cannot carry forward before the end of the leave year. The regulations allowing the holiday to be carried forward have been mirrored in Northern Ireland - The Working Time (Coronavirus) (Amendment) Regulations (Northern Ireland) 2020, but took effect from 24 April 2020.
When considering whether it was reasonably practicable for a worker to take leave due to coronavirus, employers should consider various factors, such as:
• If the business faced increased demand due to coronavirus that would require workers to continue to work • How far the business’ workforce was disrupted by coronavirus and the options available to the business to provide temporary cover for essential duties • The health of the worker and how soon they need to take a period of rest • The length of time remaining in the worker’s leave year, to enable the worker to take holiday at a later date within the leave year • How much the worker taking leave would impact on wider society’s response to, and recovery from, the coronavirus situation • If the remainder of the workforce are available to provide cover for the worker taking leave Employers should do everything reasonably practicable to allow workers to take as much of their leave as possible in the year to which it relates, and it is best practice for them to give workers to the opportunity to take holiday at the earliest practicable opportunity. It is unlikely that workers who are on furlough will need to carry forward statutory annual leave, as they have the right to take it during the period of furlough. As previously discussed, employers will be required to pay the correct holiday rate which is likely to be higher than the amount they can claim through the Coronavirus Job Retention Scheme (CJRS), so they must make up the difference. If the employer is unable to fund the difference this would make it not reasonably practicable for the worker to take their leave, meaning that they could carry their annual leave forwards. The worker must still have the opportunity to take their annual leave, and to receive the correct amount of holiday pay before the carried annual leave is lost at the end of the next two leave years.
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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