Hats off to the Government for recognising the importance of annual leave entitlement in the wake of the coronavirus. The Government is battling so many challenges right now and it’s trying to do what it can to safeguard employee welfare; e-days thinks that the new ruling should be commended but there are many considerations and it creates an interesting conundrum from UK businesses. This article outlines the new ruling on leave entitlement carry-over, and it examines the possible issues that could result further down the line. There is no easy answer, but businesses need to be prepared and we hope this article helps.

Paid annual leave is undoubtedly the number one perk for employees (except getting paid of course!) Many employees however, have had to cancel holidays in order to deliver vital services that help keep the UK going at this challenging time. Other workers have lost out on their holidays abroad due to lockdown and cancelled flights. Either way, very few workers are winning out of this situation.

Previous to the new Government ruling, companies could set their own holiday carry-over rules with many adopting the use-it-or-lose-it approach whilst many others have a more liberal attitude often allowing 3-5days maximum entitlement carry over. Restricting the amount of carry-over days typically makes sense as it allows an even spread of employee leave to be taken during the year – this makes for easier business planning. The new ruling does however provide a conundrum for UK businesses.

The new carry-over ruling

On the 27th March, the Government announced that key workers, who have not taken all their statutory annual leave, will now be allowed to carry it over into the next 2 leave years. It states that employees can carry over up to 4 weeks of unused leave. This allows staff to continue working during the outbreak in an effort to combat coronavirus, without the worry of losing their annual leave.

Analysis of the new ruling

Let’s examine what the potential impact might be to businesses across the UK.

Staff shortages/productivity challenges at key times:

If a business retains the same number of employees next year but those employees are now able to take more annual leave, then clearly there will be less working days available during the year. Less working days could have a massive knock-on effect to critical services and projects further down the line may be critically understaffed. To combat this scenario, companies may have to recruit more employees in order to deliver the same level of service – and with more employees comes more cost, which many businesses may not be prepared for. It may be that businesses can be smart and encourage annual leave to be taken at times where demand is lower for their services. To do this they may need an absence management solution like e-days to easily manage staffing levels at different time in the year. See how our product works here.

Burnout, stress and mental fatigue

2020 is likely to be a very challenging year for workers – for many reasons e.g. self-isolation, lack of social contact, cancelled holidays, extra work, financial insecurity, general anxiety /fear, not seeing loved ones etc. the world can be an unforgiving place at the best of times, but with these extra pressures a person’s ‘metal’ is under significant duress. Many people will be okay, but many may find themselves struggling with their mental health. This will be an important time for having great friends and family, but employers can also do their bit to support. Forward thinking companies may wish to combat employee mental stress through a range of initiatives designed to support employee wellbeing e.g. innovative reward and recognition programmes, access to virtual GPs, proactive sickness management with NHS signposting, employee assistance programmes etc.

Financial reporting (annual leave accruals)

Businesses trying to manage annual leave on paper and spreadsheets (or in poorly provisioned HR systems) are already struggling to maintain accurate financial reporting of annual leave accruals for FRS102. This issue will be exasperated due to the increased number of workers carrying-leave forward and the inevitable calculations that will need to be done regarding accrued annual leave for the balance sheets. E-days customers will be able to run quick and simple reports to ensure accurate accrual and carry-over data for FRS102.

Annual leave requests and approvals

A company with 250 staff will process approximately 4000 requests and approvals for annual leave per year. With the extra leave entitlement following the new carry-over ruling, these requests could be increased by up to 50%, making it even more important for businesses to have robust and easy to use self-service systems in place to facilitate the booking and entitlement deductions process. Watch how it works here. It is time for businesses to get prepared.

We welcome thoughts on this subject at enquiries@e-days.com

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