Sometimes a situation arises where an employee has built up a large annual leave balance. Not only might this be a potential financial liability for an employer, given annual leave needs to be paid out at the end of employment, but health and safety concerns might arise, such as is the employee having adequate breaks from work? An employee might conversely want to use their leave but find that their employer will not agree. What can employers and employees do in this situation?
Annual leave rights and obligations are covered by the Holidays Act 2003. The Act provides several ways in which accumulated annual leave can be addressed.
When can an employee take leave?
The Holidays Act 2003 states that “An employer must allow an employee to take annual holidays within 12 months after the date on which the employee’s entitlement to the holidays arose”. This does not create a positive obligation on an employer to ensure an employee actually takes the leave but it does mean that an employer must make it possible for an employee to be able to take leave within the 12 months it falls due. Failure to do so could, for example, open up employers to action by the Labour Inspectorate; the imposition of a financial penalty; and/or a personal grievance claim.
Separately, employers can ask an employee to use their annual leave which has fallen due (e.g. within 12 months of employment starting and every 12 months after) and, if agreement is not reached, direct the employee to use their leave on no less than 14 days’ notice. However, employers cannot direct an employee to take annual leave in advance (e.g. annual leave which has not yet fallen due).
In trying to reach agreement, consultation and negotiation should be genuine. While the following case was based on the employee’s employment agreement, the wording was not dissimilar to the requirements of the Holidays Act.
In the case, the agreement provided that timing of leave was to be agreed between the parties but, where agreement was not reached, was at the employer’s discretion. The employee, a urologist, accrued an abundance of annual leave over his employment. Following the employer locating a locum, they discussed with the employee the possibility of him taking leave for six months, commencing the following month. The employee was not keen on this idea due to timing and, after some discussion, the employer fixed the leave to be taken over the following five months. A claim for unjustifiable disadvantage was made out in the (then) Employment Tribunal because the employer failed to meet their obligation to consult and negotiate. This was because they had not allowed the employee input into the timing of the locum’s visit and, in the circumstances, they had not genuinely consulting with the employee when fixing the timing of the leave.
Further in terms of agreement, if an employee suggests a proposal for when they will use their leave, such as one week now, one week in a month, and one week a month later, the employer must not unreasonably withhold consent. In other words, if an employer declines, they must have reasonable grounds to do so. In one case, an employer was found to be in breach of this where they declined consent to an employee who asked to take leave in 3 months’ time because the employer did not yet have an employee to cover the employee requesting leave. In that case, the employee had been employed for over 12 months and had taken no leave to that point. While this was not stated expressly, the Authority appeared to consider that the employer’s lack of staff cover was, in this case, not sufficient to reasonably decline the leave request. However, in other circumstances, possible grounds could include when an employer cannot reorganise work among existing staff, the employer cannot recruit additional staff, or there is a planned structural change.
Finally if an employee wants a longer break at one time, employers must allow employees to take at least 2 weeks’ leave as a continuous block in every 12 month period.
Paying out leave in cash
An employee can ask for one week’s annual leave to be cashed up but an employer cannot force an employee to do so. Any request by an employee can also only occur once within one 12-month period. The employer does not have to agree to this, so long as they have considered it within a reasonable time and advised the employee of their decision in writing. There is no obligation on employers to provide a reason for their decision.
Can annual leave expire?
Annual leave entitlements do not expire if they are not taken. The Holidays Act provides that an employee’s entitlement to annual holidays remains in force until either the employee has taken the entitlement as paid holidays or the leave has been paid out, such as on termination of employment. Thus, even if annual holidays are not taken within a 12 month period, employees are still entitled to the leave. This is despite what an employment agreement states; employers cannot contract out of the Holidays Act.
After employment ends
Where the employee’s employment ends, the employer will have to pay that employee:
- 8% of their gross earnings since their last entitlement date, less any amount paid for holidays taken in advance; AND
- The value of any annual holidays which have already fallen due but not taken, paid at the rate of the greater of ordinary weekly pay as at the date of the end of the employee’s employment or average weekly earnings during the 12 months immediately before the end of the last pay period before the end of the employee’s employment.
Why taking leave is important
Both employers and employees have a duty to take steps to protect employee(s) health and safety. Taking breaks away from the workplace is one way to help safeguard employees against the effects of overwork, as well as to reduce the likelihood of fatigue related mistakes or incidences. Employers and employees should therefore work together to make sure that regular breaks are taken, utilising some or all of the above mechanisms.
This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. Please feel free to contact us at Parry Field Lawyers:
- Mike Henderson-Rauter, Senior Solicitor – mikehenderson-rauter@parryfield.com
- Hannah Carey, Senior Counsel – hannahcarey@parryfield.com
