The holiday policy lottery, will you be a roll over winner?
May 19, 2020

As organisations transition into the “new normal” one of the topics on all HR agendas is annual leave…

Following the publication of the government’s guidance on 13th May, organisations are now considering how to strike the right balance between ensuring their employees get the rest, relaxation and time off work that is needed for their general well-being, while still ensuring they protect their organisations’ productivity and bottom line.

Falcon Brook conducted research across a range of clients, including several well-known Energy and Financial Service organisations, to ascertain how these businesses are navigating their post-pandemic annual leave policies and dealing with the challenges these present.

One key employee trend that has become abundantly clear is the desire to “bank” annual leave until travel restrictions have been lifted and holidays can be taken outside the home. Our research indicates that 80% of company employees still have four to six weeks of holiday left to take for the year. The main concern for leaders is that if employees take all of their holiday allocation in the last four months of the year, when there is greater clarity over what the true impact of Coronavirus will look like in the long term, the effect on the company could be worse than the pandemic itself.

With working from home taking root and lockdown measures easing, albeit slowly, there is no question that a company’s response to annual leave will become a litmus test for both existing and future employees. So important is this subject that some companies are prioritising holiday entitlement protocol as a crisis management topic. They realise that being competitive is key, especially to stand out in what will become an increasingly competitive market for the best talent.

From an HR perspective a key consideration is that the guidance may not have any legal basis. In an article in People Management, Peter Nicholson at Nelsons said that “strictly speaking, the new guidance has no legal effect. Employment tribunals will not be obliged to follow it when deciding cases about holiday pay. However, it is very significant for employers because it goes further, and into more detail, than any previous guidance on this subject.

Here is a summary from our research:

  1. The majority of businesses have already adjusted their holiday policy in response to the pandemic.
  • Only three organisations surveyed were yet to formally communicate new provisions for taking leave.
  1. Taking leave is being encouraged during lockdown:
  • The vast majority of businesses are advising – or in some cases, requesting – that employees take some (from 10 to 20 days) or in a few cases all of their annual leave for the current cycle before September.
  • Under the Working Time Regulations, some companies already plan to give notice to employees to require them to take at least two weeks of leave before 31st August if they haven’t taken enough holiday of their own accord.
  • A small number of companies are encouraging employees to take time off during the lockdown for mental health reasons, though they will not be enforcing this. These organisations are also more likely to be offering more generous carry over terms for untaken annual leave and for cash payment in lieu of days not taken.
  1. Businesses are extending how holiday can be carried over to the next cycle:
  • Most businesses are allowing some leave to be carried over into the next cycle, ranging from 10 to 20 days.
  • This is in addition to the number of days that employees are normally permitted to carry over.
  • In accordance with government guidelines, some organisations are also allowing employees an extended period within which to take these additional days.
  • A small number have already stated that leave may not be carried over to the next cycle, despite the government’s guidance that this should be the case.
  1. Payment in lieu hangs in the balance
  • The majority of organisations are not yet making decisions on paying for days not taken, though this is being discussed.
  • Some organisations are reviewing their usual holiday buy-back programme because of the prohibitive cost due to the pandemic.

There is no question that annual leave entitlement is emotive and can fundamentally impact employee motivation, attitude and loyalty.

Economist and neuroscientist, Louise Pollock, highlights the importance of clarity in helping employees to understand and support company policy on this emotive subject: “Being clear about the policy will provide employees with certainty. Lack of clarity means uncertainty and leads to an inability to plan. This ultimately produces stress, which in turn, if it is long-term stress, leads to poor mental health.”

From the perspective of executive recruitment, we would urge businesses to consider how they can balance the costs and risks to the business with framing a new pandemic friendly policy that also embraces employee needs.

Some key points to consider are:

  • To what extent does your organisation require a ‘one size fits all’ approach across the entire business?
  • Is there scope to empower teams to establish their own approach to holidays based on their business cycles, P&L and personal circumstances?
  • Rather than mandate the taking of holiday, could a phased approach combined with monitoring of actual days taken be more effective in encouraging employee communications?
  • Have you communicated how your pandemic holiday measures fit within the wider business strategy and performance?
  • To what extent are your leaders encouraging positive behaviours by taking time off to ‘lead by example’?
  • Are there options for consulting with employees, or involving employees in decisions around changes to leave, in particular, to address the needs of employees working from home who may have responsibilities as carers?

As a final point: if you are urging employees to take time off for mental health reasons, think about other measures and behaviours that can communicate the importance that you place on mental health, and the role of work life balance in promoting this.

Many of the businesses we spoke to are already introducing measures to support mental health wellbeing:

  • Weekly webinar where the leadership team promotes switching off completely at the weekends and at 6pm on weekdays.
  • Additional mental health benefits such as a phone counselling service, mental health first aiders and online stress relief apps.
  • Daily mental health activities available online for anyone in the company.
  • Employees encouraged to find the work pattern that suits them, with flexibility to take time out during the day for home schooling and family activities, with working hours made up in the evenings and weekends.

If you’d like further insight or advice on how to best shape your annual leave policies to attract and retain the best talent, please don’t hesitate to reach out to Falcon Brook for more information.

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