Essential staff will not have to use all their annual leave allocation this year, the Government has said.
The move will help key industries remain well-staffed as the UK battles the coronavirus outbreak.
Business Secretary Alok Sharma said rules will be relaxed to allow up to four weeks of unused holiday to be carried into the next two leave years.
Separately, the Government will also cover employer pension payments for furloughed staff.
Mr Sharma said: “Whether it is in our hospitals, or our supermarkets, people are working around the clock to help our country deal with the coronavirus pandemic.
“Today’s changes will mean these valued employees do not lose out on the annual leave they are entitled to as a result of their efforts, and employers are not penalised.”
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The changes to annual leave policy will be in the Working Time Regulations and so should cover nearly all workers including agency staff and those on zero-hours contracts.
Pension payment help
Last week, Chancellor Rishi Sunak said the government would subsidise 80% of workers’ salaries up to £2,500 per month if they were furloughed – a process where staff become temporarily redundant but stay on company payroll.
Now the Treasury will cover the employer national insurance and minimum auto-enrolment pension scheme contributions on the wages they pay their temporarily redundant staff.
It says the extra cover could save firms £300 a month per employee.
Companies such as Pret, Brewdog and Snappy Snaps owner Timpson Group backed the extra subsidy from the Government.
James Timpson, chief executive of Timpson Group, said the full package of support “makes our future secure and our colleagues and suppliers can sleep well at night now”.