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Firstly, it is contrary to the Working Time Regulations 1998 (WTR) to pay for annual leave in lieu of it being taken. This should only be done when the employee leaves their employment during the year and has accrued more leave than they have taken. It’s important to remind your client that the purpose of annual leave is to rest and recuperate, and by just paying for it the employees are not getting this benefit, which might lead to burnout. As such, your client should stop doing this and make it clear to all staff that they will no longer be doing so.
You should encourage your client to consider why their employees are not taking their annual leave. Are they being prevented from doing so due to staff shortages? Is there so much work they feel unable to do so? Do they feel it would be frowned upon? Any of these can lead to serious issues for your client in terms of employee retention, commitment and morale, and so they should investigate and resolve this quickly.
Now that we are just over halfway through the year, assuming your client bases their annual leave year on the calendar year, this is a good opportunity for them to write to staff to remind them that they should be taking all of their annual leave in the year it is accrued, and that they will not be paying for any untaken annual leave from now on. Providing information on days annual leave can be booked, and reminding employees of the process to do so, will also be beneficial and may prompt staff to start booking to avoid the disappointment of not getting the days that they want.
Under current rules, there is the possibility for your client to allow for carry over of 1.6 weeks annual leave into the next year, should their employees wish to do so (and they are happy for them to do it). However, your client needs to think about a few things in relation to this:
• This means more leave to take next year. If they are already struggling to take it, why would next year be any different?
• It could mean the employee will want to take a large chunk of annual leave at once, for example if they have a big holiday planned. Is your client able to accommodate this? Addressing it when the employee requests carry over is best, rather than waiting until next year and receiving a request only for it to be declined and the employee disappointed.
The government has recently proposed changes to the structure of the WTR. Currently, the total 5.6 weeks of statutory annual leave is divided into two parts: 4 weeks, that must be taken in the same leave year, and 1.6 weeks, which as above can be carried over. Under government plans these two parts will be combined into one. It is unclear at this time what affect this will have on the right to carry over.
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