What Happens if an Employee Doesn’t Take their Paid Annual Leave?

20 November 2018 | Jatinder Tara

Do they automatically lose statutory rights to their annual leave?

UK workers are entitled to minimum 5.6 weeks of paid leave under the Working Time Regulations 1998, which equates to 28 days for a typical five-day working week, including public holidays, with pro-rata entitlement for those who work fewer than five days per week.

Data from the Office for National Statistics reveals that although the amount of holiday being taken by employees has reached its highest level since 2007. The figures go on to show that many employees are exceeding their contracted hours and choosing not to take holiday during times of uncertainty; either through job insecurity, fear of redundancy or financial necessity and this could possibly amount to one in 12 UK workers – an estimated 2.2 million people.

Why it is important to take annual leave

The requirement for an employee to take paid leave is equally important in the context of protecting the employee’s health, safety and welfare where an employee could be exhibiting signs of stress and exhaustion. The employer has a duty to consider ways of reducing that person’s stress levels, which could include requiring the employee to take a period of annual leave.

Lord Justice Mummery stated in the case of NHS Leeds v Larner 2012, the purpose of paid annual leave, “is to enable a worker to enjoy rest, relaxation and leisure: it is for the protection of health and safety” and this is the reason why pay in lieu of statutory holiday is prohibited except where a worker’s employment is terminated.

In light of the above, should employers take a laid back approach to ensuring that employees exercise their right to take paid holiday leave or force workers to take their annual leave before the holiday year runs out.   The recent CJEU decision in Kreuziger v Land Berlin and Max-Planck-Gesellschaft zur Förderung der Wissenschaften eV v Shimizu November 2018 confirms that the employer must act in a pro-active manner, otherwise the untaken first four weeks leave would need to be carried over into the next holiday year irrespective of what the contract says. Employers are entitled to operate a "use it or lose it" approach to the remaining 1.6 weeks holiday which comes from national law.

Managing holidays proactively

To prevent a carry-over of untaken statutory holidays, employers would need to manage holidays proactively namely:

  1. encourage employees to submit dates for their holiday as far in advance as possible
  2. set up an alert system so that managers can identify holidays taken or not taken
  3. carry out regular reviews regarding holidays: whether employees have taken holidays or requested holidays, or at least planning to take holiday leave
  4. to remind employees periodically how much annual leave they have outstanding,
  5. in good time, say a six monthly review, ask those employees who have not taken any of their holiday entitlement or submitted any holiday dates to nominate holiday dates as a matter of urgency explaining that otherwise it will be lost at the end of the holiday year (although under reg.15 of the Working Time Regulations 1998 the Employer does have a discretion to nominate dates on which some or all of the statutory annual holidays should be taken by  giving advance notice. The notice required would be a minimum of twice as many days as the number of days' holiday that the employer wishes the employee to take. For example, the employer would have to give at least two weeks' notice in advance of the start date of a period of one week's holiday leave)
  6. to ensure that holiday leave is planned in such a way that the organisation has adequate cover at all times.

If on the above guidelines, the employer can show that the employee deliberately and knowingly refrained from taking their paid annual leave after having been given the opportunity to exercise his/her right, the case highlighted above would suggest that EU law would not prevent the right being lost after holiday year ends and also, if the employment relationship ends and there is outstanding holidays there could be an argument that there is no payment in lieu of the holiday leave not taken but this would require further clarity from the UK Courts.

The loss of holidays would not apply where the employee is off on long term sick where the outstanding holidays need to be taken within 18 months from the end of the leave year in which it accrues and where the employee is on maternity leave where the employee can carry forward her holiday leave into the next holiday year.

The right to carry forward leave when sick or injured or on maternity leave as described above applies only to the four weeks of holiday based on the Working Time Directive.

Considering the complexities of holiday rights, it would be prudent for employers to have a holiday policy in place that is actively followed by management and at Quest we can help in assisting with such matters.

See also HR Consultancy

 

 

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