In the UK the entitlement to paid annual leave is governed by the Working Time Regulations 1998 (WTR) which implements the Working Time Directive. UK law states that employees must take their entitlement to the 4 weeks leave provided for by the Working Time Directive in the leave year in which it is accrued. A payment in lieu of this leave is not permitted except on the termination of employment. However, the law in Germany states that employees are not entitled to a payment in lieu of termination and will lose the right to leave that has accrued during their employment if they do not take it.
At the end of last year the European Court of Justice (ECJ) heard two cases in which a similar question was asked. That question was,
Does the Working Time Directive override national legislation which states that no payment in lieu is to be made where the holiday has not been taken by the termination date, even where the worker did not apply to take that leave but could have done so?
What you should do
Whilst this has not been tested in the UK, we would advise businesses to ensure that at regular intervals throughout the leave year you remind your workers when the leave year ends, the fact that leave cannot be carried over, and perhaps remind them of how much leave they have to take and any limitations that might be imposed by the business on their ability to take that leave. This should be recorded so that there are clear and transparent records that you have exercised your obligation to the employee and therefore should an individual attempt to challenge it; it is unlikely that they would succeed. One way of doing this, would be to send out an email at regular intervals or to post it on the company intranet. If neither of these is feasible for your workplace, then you may want to put up posters and/or ask line managers to remind employees at team meetings or similar. This will put you ahead of the game and reduce the risk should a similar case be brought in the UK.
Please note this article should only be considered as guidance and should not be taken as specific legal advice. For further advice on this topic contact Kelly Gibson via Kelly.Gibson@tayloremmet.co.uk and 0114 218 4307.