Holiday entitlement and pay during Covid-19


It can be difficult to keep up with the changing rules and policies for small businesses at the moment. If you employ staff you might be worried about whether you are following the correct procedures and doing everything that you need to as an employer. 

We recently looked at tax relief for employees working from home, and this month we take a look at what you as an employer need to know about holiday entitlement and pay during Covid-19 so you can be assured that your legal obligations are covered. 

Holiday entitlement 

All employees are legally entitled to 5.6 weeks of paid holiday each year, though many employees will have contracts entitling them to additional paid holiday known as ‘contractual holiday entitlement’.  

Employees will receive the same holiday entitlement, regardless of whether they are on sick leave, maternity leave, parental leave, or any other type of statutory leave, and cannot be required to take holiday while off work sick. 

Any furloughed employees will continue to accrue statutory holiday entitlements, and any additional holiday provided under their employment contract. 

Holiday pay

The amount of holiday pay an employee receives will depend on the number of hours they work and how they get paid for those hours. Holiday pay should always reflect what the employee would have earned if they had been working, and they should not be financially worse off through taking holiday.  

If you have furloughed employees you cannot just pay their holiday based on the lower rate of pay they are receiving while on furlough. If an employee on furlough takes annual leave, you must calculate and pay the correct holiday pay in accordance with current legislation. If this works out to be above the pay the employee is receiving while on furlough, you must pay the difference. Taking holiday does not break the furlough period so you as the employer can continue to claim the 80% grant from the government to cover most of the cost of the holiday pay. 

Carrying annual leave forward 

Legislation states that if an employee cannot use their annual leave entitlement because they are on maternity leave or sick leave, their employer is required to allow them to carry their annual leave forwards into the following year. These rights remain unaffected by an employee being furloughed. 

During the current pandemic, the government has also passed new emergency legislation to enable employees to carry forward holiday entitlement where the impact of coronavirus means it has not been reasonably practicable to take the leave in the current year. This could be because the business has faced a significant increase in demand due to coronavirus that would reasonably require the worker to continue to be at work, or because employees are needed to provide cover for employees on leave or furloughed. 

If it has not been reasonably practicable for an employee to take some or all of their holiday entitlement due to the effects of coronavirus, the remaining amount may be carried forward into the following 2 leave years. When calculating how much holiday entitlement an employee can carry forward, employers must give them the opportunity to take any leave that they cannot carry forward before the end of the leave year. 

Here at Magpie Accountancy we can take care of any holiday pay for you as part of our payroll service. Get in touch if you have any questions.