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Holiday Pay and Holiday Year Update for Insolvency Practitioners

The COVID-19 pandemic has had an unprecedented effect on the economy and the loss of many jobs. As a result, the government has passed a raft of measures to support employers and to ensure that employees are given a certain level of protection. One such measure relates to statutory holiday and the difficulty in taking annual leave during the COVID-19 pandemic and particularly during furlough.

Regulation 13(9)(a) of the Working Time Regulations 1998 (as amended) provides that the statutory basic annual leave entitlement of four weeks may only be taken in the leave year to which it relates.  Employers and workers can agree to carry over any additional statutory leave into the next leave year (but not beyond) by means of a relevant agreement. However, as many directors do not have a contract of employment, directors have rarely been able to carry over any statutory leave.

On 26 March 2020, the Working Time (Coronavirus) (Amendment) Regulations 2020 came into effect which makes regulation 13(9)(a) subject to the exception set out in two newly inserted paragraphs (regulation 13(10) and (11)). Where it was ‘not reasonably practicable’ for the worker to take some or all of his or her leave in the relevant leave year as a result of the effects of COVID-19, he or she is entitled to carry forward such untaken leave. The ‘effects of COVID-19’ include the effects on the worker, the employer or the wider economy or society.

If the employee/director can demonstrate that it was not reasonably practicable for them to take any or all of their leave during the leave year, they can carry forward unused leave which may be taken in the two leave years immediately following the leave year in respect of which it was due.

However, the new rules apply to the four weeks’ annual leave (20 days) provided for by regulation 13 and not the additional 1.6 weeks’ annual leave (8 days) provided for by regulation 13A.  On this basis RCUK will be submitting claims to the Redundancy Payments Service (“RPS”) for up to a maximum of four weeks carried over leave for directors and employees in circumstances that are consistent with Regulations 13(10) and 13(11).

Additional changes to Holiday Pay calculations.

In the absence of a written contract of employment, historically holiday pay claims have been made to the RPS using the holiday year 1 January to 31 December as the base line. S13 of the Working Time Regulations 1998 (as amended) states:

(3) A worker’s leave year, for the purposes of this regulation, begins—

(a)on such date during the calendar year as may be provided for in a relevant agreement; or

(b)where there are no provisions of a relevant agreement which apply—

(i)if the worker’s employment began on or before 1st October 1998, on that date and each subsequent anniversary of that date; or

(ii)if the worker’s employment begins after 1st October 1998, on the date on which that employment begins and each subsequent anniversary of that date.

On this basis RCUK will now calculate and submit holiday pay accrual in accordance with S13 (3) (b) unless there is evidence to the contrary in a relevant written contract of employment/S1 statement of Terms and Conditions.

If you have any questions in relation to the content of this Newsletter, then please contact Gary Addison on 07766 727308 or email Gary at [email protected]

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