Towards the end of the holiday year, employees often find themselves with more annual leave leftover than they want, or are able, to take before time runs out. During the COVID-19 pandemic, people had more than ever and so the government relaxed the rules to support key industries in allowing staff to carry over more than usual.
But with the two year time limit on those rules fast approaching, you might want to look into your employees’ carryover to ensure you aren’t penalised.
What are the rules on carrying over annual leave?
Allowing your team to carry over annual leave isn’t simply a nice thing to do as an employer; it’s a legal requirement. As a statutory minimum, workers in the UK are legally entitled to 28 days—or 5.6 weeks—of paid holiday per leave year (this often runs Jan-Dec but can change from one company to another).
Of those 5.6 weeks of annual leave, employees must take at least 4 weeks within the leave year, leaving 1.6 weeks (under Regulation 13A of the Working Time Regulations 1998) that can be carried over into the next year.
However, it still must be agreed (in writing) between the employer and employee that the carryover of annual leave is permitted. While your annual leave allowance is a legal requirement, the right to carry some over is not, so it’s important that both sides are clear on what has been agreed upon.
Because an employee’s annual leave is split between two different sets of regulations, 1.6 weeks is the legal maximum that can be carried over into a new year. This doesn’t mean that all employees will automatically be offered this, as it’s down to businesses to find a carryover policy that works for them.
How did the rules change during COVID-19?
Usually, when carrying over annual leave, workers are only allowed to carry a maximum of 1.6 weeks over into the following leave year. But when the COVID-19 pandemic hit and a number of key industries were put under immense pressure and strain, many workers simply weren’t able to take their annual leave in time.
Therefore, the government introduced new measures to protect employees from losing their allowance, ruling that they would be allowed to carry up to 4 weeks of unused leave over into the next 2 leave years.
This change didn’t apply to the 1.6 weeks under regulation 13A leave, but this could still be carried forward one year by agreement between workers and employers, as per the normal guidance.
This change eased the requirement on businesses to ensure that workers took their allocated annual leave allowance at a time when granting it could leave them short-staffed, while ensuring employees didn’t lose out on this benefit either.
What do I need to know about annual leave carryover now?
While holiday years can differ from one business to another, the most popular by far is to follow the calendar year (Jan 1st-Dec 31st). So given that the rules were relaxed in 2020 for the next two leave years, that means those rules come to an end (for most) at the end of 2022.
Potentially, some businesses and industries will now find themselves with employees who have had an additional 4 weeks of annual leave to take this year (carried over from 2020), as well as their usual 5.6 week allowance for 2022.
With the rules back to normal, only 1.6 weeks of this allowance (from the 2022 “pot”) will be allowed to be taken into 2023, so it’s important employers are aware of this and are able to plan accordingly.
What happens if employees don’t take their annual leave in time?
With some people potentially having almost double their usual allowance for this year as a knock-on effect from COVID, some might wonder if they are able to be paid for this leave instead. However, The Working Time Regulations 1998 are clear that annual leave ‘may not be replaced by a payment in lieu, except where the worker’s employment is terminated’.
This means it’s important to ensure employees take their annual leave, or businesses risk a potential financial penalty.
While payment in lieu might seem like a good idea for both parties, there are a number of reasons that this isn’t allowed.
Statutory annual leave allowances are designed to give employees paid time away from work to relax and recharge. Allowing payment in lieu may incentivise people to save up their annual leave, if they prioritise money over a day off, which can pose risks to their health and wellbeing, as well as increase the risk of burnout.
Therefore, whether your employees have a boosted allowance due to COVID-19 or not, it’s important to encourage them to take all of their allocated days in order to promote employee wellbeing and cultivate a positive working culture.
Our intelligent edays absence and leave tracking software makes it easy to manage your team’s annual leave, with enhanced visibility, reduced admin requirements and customisable trigger alerts. This includes managing any carry over, as well as being able to work to personalised entitlement years if your leave year doesn’t run Jan-Dec. Find out more by checking out our holiday booking feature or book a demo to see it in action.
If you’re interested in learning more about the knock-on effects of having too much annual leave leftover at the end of the year, then you can watch our recent webinar with PM Insights.