Annual leave as a term takes most of us to a happy place, but is the biggest administrative burden for an SME employer.

The HR Dept Sevenoaks led by Sandhya Iyer runs their HR and employment law advice line, based out of West Kent supporting small business employers. One of the most common issues being faced by employers, now and historically, is how to manage annual leave. In this blog, we look at why this is more of an issue currently and in the near future, and how to deal with it.

Excessive accumulated leave carried forward

This is a result of either furloughed staff not being directed to take their annual leave whilst on furlough. Or as a general practice, it has not yet become a part of the business culture, to take holiday in the year in which it accrues, without carrying forward excessive amounts of leave. No doubt, small businesses are busier in general due to leaner teams, which puts added pressure on annual leave planning. But there are ways to address this and we discuss this below.

In simple terms, in England, all staff are entitled to accrue 5.6 weeks annual leave in a leave year. Statutory holiday entitlement is capped at 28 days for a full time worker. For the purpose of this blog let’s refer to this as ‘minimum’ leave entitlement. This is obviously pro rata’ed for staff who work part time or variable hours. But the right to accrue AL, starts from day 1 of employment.

A common question is whether leave can be carried forward, and if yes, then how much. There are specific case laws which have confirmed that up to a maximum of 4 weeks (pro rata’ed for a part time worker) out of the 5.6 weeks entitlement can be carried forward, only under the following circumstances:

  1. Where an employee is off sick long term and hence unable or unwilling to take their annual leave in the current leave year
  2. More recently, in March 2020, the government announced that 4 weeks’ leave, can be carried forward up to a maximum of the two consecutive leave years. This is more applicable to staff such as NHS workers, for instance, who were unable to take AL during the peak of the pandemic months.

In all other circumstances an employer is able to direct staff to take their holiday during the entire leave year. This also includes staff who were furloughed.

Managing AL tends to be challenging for a busy small business employer. But it is possible to achieve this with regular reminders to staff, and proper planning of AL. Not all staff tend to take AL during the same time of the year. A lot of this depends on family needs and school terms. Hence discuss with your teams, early on in the leave year and understand preferred leave times for different staff. This will help you to plan leave schedules early. By having these conversations earlier in the leave year, you will be able to incorporate your staff’s holiday needs outside of the most busy periods for your own business.  Once a proactive, well managed leave schedule becomes a part of your business culture, it gradually becomes the norm. And carried forward leave doesn’t seem like a burden to manage anymore.

We have an extra bank holiday in 2022. But how should employers process this?

It is all well and good managing AL, but what do we do with additional bank holiday announced for 2022? In November 2020 the government announced an additional bank holiday in June 2022 to celebrate the Queen’s Platinum Jubilee. The second May bank holiday will be pushed back to Thursday 2 June, and the bonus bank holiday will follow on Friday, 3 June 2022.

In a nutshell:

  • Thursday 2 June and Friday 3 June 2022 will be a one-off double bank holiday.
  • Employment contracts will dictate how holiday time can be taken.
  • Any changes to existing contracts should be done professionally and must have employee agreement.

Some questions for employers to consider:

  • Must Employers permit staff to take the extra time off?
  • How should part-time staff be treated?
  • What if you need your staff to work on the bank holidays? 

Answers to these questions can normally be found in your employment contracts. In the UK, there’s no automatic right to paid time off for a bank holiday, or indeed enhanced pay if they must work.

If your employment contract describes annual leave entitlement as a set number of days plus bank holidays, then contractually your staff are entitled to the extra days of bank holiday off. However, if the contract just states a total number of days off, or specifically enumerates only eight bank holidays, then they will not be entitled to take the additional bank holiday off in June 2022.

That said, if it suits your business, you may be prepared to just give them the extra time off in the spirit of celebrations. If you don’t wish to do that, then engage with your staff on the reasons behind it.

Some employers may face slightly more complex issues. Nevertheless, well-worded contracts will always provide your business with the support it needs.

For example, if your business operates on bank holidays and you need your staff to work on the day, you can draft your contracts to reflect this. You would grant the 5.6 weeks leave, but state that this does not include bank holidays and they are required to work on these days. In such cases, if staff wish to take a bank holiday off, then they will be required to submit an annual leave request, which can be accepted or denied, as you wish. On the other hand, if working on bank holidays is not an operational requirement for your business, then you would word your contract to prescribe that bank holidays must be taken as holiday.

When it comes to part-time employees, they have the right not to be treated less favourably than a comparable full-time worker. Hence they would be entitled to a pro-rata-ed allowance of paid bank-holidays, regardless of whether their normal working day falls on a bank holiday.

So watch out for a potential rush of employees booking three days leave ahead of this double bank holiday as it will lead to them enjoying a nine-day break for the price of three days AL. There is nothing wrong with this in itself, but make sure you manage holiday requests fairly and in time, so you are not short staffed. 

What happens when I realise my contract is not bespoke and doesn’t fit my business needs?

There is a clear advantage in issuing a bespoke employment contract to your staff. The above example of annual leave clearly demonstrates this. This is your business, and you define the boundaries and culture. In order to be able to that effectively, a bespoke contract is a no brainer.

At the HR Dept we do not use off the shelf contracts for our clients. Our clients thrive because they have the benefit of not just a bespoke HR and employment law framework, but specific and affordable advice, to address all staff situations.

Having said the above, when your current contract wording does not meet your business needs, you are able to amend it, provided you have consulted with your staff on contract changes, and taken all reasonable steps through consultation, to seek their agreement. This does not include new employees however, who were not issued your old contracts anyway.

For enquiries on this topic or to discuss your HR and employment law needs, please contact Sandhya Iyer from The HR Dept, at sandhya.iyer@hrdept.co.uk or on 01732 622 209 / 1892 629 669.