Holiday and Leave Whilst on Furlough

Since the Chancellor announced the Coronavirus Job Retention Scheme in March 2020, we have received a lot of questions from employers about what to do with holiday pay. Some guidance has now been published and it’s been made clear on gov.uk that there may be further guidance to come; please see the bottom of this article for the relevant extract from Gov.uk.

Below are some holiday FAQs for those on furlough:

1. Do furloughed employees continue to accrue holiday while on furlough leave?

Yes. Employees will be entitled to the greater of 5.6 weeks’ holiday per year, or the entitlement included in the employment contract.

2. Can employees take holiday while on furlough leave?

Yes. There has been some confusion about this. The guidance below makes it clear that employees can take holiday while on furlough and the employer will still be able to access the grant for periods spent on holiday during furlough.

3. What rate of pay do employees get for holiday taken on furlough leave?

Holiday pay should be paid at the employee’s normal rate of pay i.e. equivalent of what they would normally get paid when not on furlough leave. If pay usually varies this should be an average of last 52 weeks.

4. Can employers claim back full pay for holidays taken on furlough?

No. The employer will be able to claim up to 80% (subject to cap of £2,500 gross per month) through the furlough scheme but will have to top up any holiday pay to full pay. As a result, some employers may not be able to afford to allow employees to take holiday during furlough.

5. What about bank holidays during furlough?

The employer can claim for bank holidays but must top the employee up to full pay if the bank holidays are to be classed as holiday days and deducted from the employee’s entitlement.

Alternatively, the employer may pay a reduced rate due to being on furlough and then given a day in lieu for the bank holiday.

6. Can employers force employees to take holiday during furlough?

Yes, you can force employees to take a proportion of their holiday during furlough. You should either give employees double the notice of the holiday you require them to take or notice in accordance with the employment contract.

7. Can you refuse holiday during furlough?

Yes. If the employer cannot afford to top up to full pay during this time, you can refuse the employee holiday.

8. What happens if an employee has not been able to take their holiday during furlough?

The employee will be allowed to carry any such holiday over for 2 years.

Extract from gov.uk below:

Holiday pay

Whilst furloughed you will continue to accrue leave as per your employment contract. You can agree with your employer to vary holiday pay entitlement as part of the furlough agreement, however almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below.

You can take holiday whilst on furlough. Working Time Regulations (WTR) require holiday pay to be paid at your normal rate of pay or, where your rate of pay varies, calculated on the basis of the average pay you received in the previous 52 working weeks. Therefore, if you take holiday while on furlough, your employer should pay you your usual holiday pay in accordance with the WTR. Employers will be obliged to pay the additional amounts over the grant, though will have the flexibility to restrict when leave can be taken if there is a business need. This applies for both the furlough period and the recovery period.

If you usually work bank holidays then your employer can agree that this is included in the grant payment. If you usually take the bank holiday as leave then your employer would either have to top up your pay to your usual holiday pay, or give you a day of holiday in lieu.

During this unprecedented time, we are keeping the policy on holiday pay during furlough under review.

For further advice or clarification on any employment law, or HR related matter, please do not hesitate to contact Kate Brooks kate.brooks@ellisjones.co.uk or 01202 057754.