Furlough and Holiday Advice For Employers

Since the furlough scheme was announced in March 2020, one of the most common areas that has been asked about is holiday, and whilst no-one is jetting off to top up their tan at the moment there are still lots of relevant questions being asked.

For what seemed like a lifetime the government were hazy on guidance in this area but there has been some clarification over the last couple of weeks. Having said that, the latest guidance states that ‘During this unprecedented time, we are keeping the policy on holiday pay during furlough under review’ so anything can happen and change in the foreseeable future!

Here’s the Streetwise take on Furlough and Holiday…

I’ve got a furloughed worker who wants to take holiday in order to top up their 80% furlough pay – can we do this and how does it work?

Holidays should be requested, authorised and taken within your Company’s normal holiday rules/procedures.

If employees book holiday time to take off during furlough, you can claim for 80% of the holiday pay through the grant, in the same way as their normal salary.
However, where holiday is taken during a period of furlough, the latest guidance outlines that you should top up the holiday pay to the full salary amount. If holiday is not taken, it continues to accrue during furlough.

If you are not in a financial position to pay furloughed employees in full during annual leave you can refuse employees’ requests for holiday in what would otherwise be a furlough period.

Where possible, you should give the normal notice, which is as much notice of a refusal as the amount of leave requested, so two weeks’ notice if the leave requested was for two weeks. If you are planning to do blanket refusals through furlough, it is best to be up front about this and the reasons why, send a comms or include in the confirmation letter to ensure you don’t spend lots of time refusing requests in the coming weeks.

You may prefer employees to use up their holiday allowance rather than storing it up.

We’ve had some Bank Holidays during the period some of my employees have been furloughed, what impact does this have?

Currently the job retention scheme (and therefore furlough period) is set to run until end of June 2020, meaning that from 1st March when the scheme was backdated from, and end of June, there will be four bank holidays (10 April, 13 April, 8 May and 25 May).

Employees who are usually entitled to take bank holidays as holiday (e.g. their contractual holiday allowance is inclusive of bank holidays and they do not have to take these days on the actual bank holiday days) will still be able to take these holidays whilst on furlough, as per the above.

Based on the latest guidance, if employees don’t usually work bank holidays then employers can agree that this is included in the grant payment. If employees usually take the bank holiday as holiday, then employers would either have to top up pay to the employee’s usual holiday pay (so 100%) or give a day of holiday in lieu at another time.

Again, communication is key here, so ensure your staff know which route you’re going down so that both of you can plan going forward.

Do I have to pay full holiday pay if holiday is taken during a furlough period or can I just pay the 80%?

Yes, you do have to pay full holiday pay (100%) if holiday is taken during a furlough period.

Based on extensive previous case law, holiday pay must be based on normal remuneration. This applies for at least the four weeks EU minimum leave and includes overtime, allowances, compulsory commission and bonuses, meaning employees do not get less pay when they are not working.

Although it is more expensive to have an employee on holiday rather than furlough, the advantage for the employer is that the employee’s remaining holiday entitlement between now and the end of the holiday year is reduced.

In the absence of express guidance, if you request furloughed employees to take holiday you can claim the 80% grant money from HMRC as they are not at work and not working. However, you will be required to top the holiday pay up to their usual full salary amount.

Will the minimum 3-week furlough period be affected by a furloughed employee taking holiday?

There is no clarification on this point at the moment, but we think not. There is nothing on the government website or HMRC portal (now opened) that suggests that this is so.
I’m worried about my staff having lots of holiday to take post-furlough and whether the business can accommodate it – can I require furloughed employees to use up their holiday whilst they are furloughed?

In short, yes. Employment law states that employers can require workers to take holiday as long as they give twice as many days’ notice as the period of leave the worker is required to take. For example, if you require an employee to take two week’s annual leave at a certain time, you must give the employee at least four weeks’ advance notice (or whatever is outlined in the employment contract, if it is stipulated in the contract).

However, you do also need to think about the wider implications of doing so. You may get challenged by your employees when insisting they take annual leave during a period of furlough, when government advice prevents them from travelling freely anywhere. The safest way to proceed would be to gain your employees’ agreement to take annual leave while on furlough. It is likely employees will agree as it would be on full pay.

If you follow this route, you will initially need to check how much holiday your employees have accrued and taken. It is advisable only to allow/ask employees to take holiday which they have accrued up to the end of the furlough period, so that they are not in a position that they have overtaken if after furlough you need to make redundancies or dismissals.

What if an employee (furloughed or not) asks to cancel pre-booked holidays?

If an employee no longer wants to take time off which was been previously booked, then you can refuse the cancellation on the basis that it has already been approved and still tell them to take the time off. To change the holiday the employee needs to get your agreement.
Once the lockdown lifts and things are a bit more normal can I restrict the taking of annual leave?

Yes, you can refuse to allow annual leave provided there is a business reason for doing so. This may well be helpful in the recovery period when you need people at work.

You can also give notice to an employee to cancel any annual leave they have pre-booked. If you decide to do this, you must give the employee at least the same number of days’ notice as the original holiday request (so 5 days leave needs 5 days’ notice to cancel).

It is best to explain clearly why you need to do this and seek to resolve staff worries about how it will impact on entitlement or plans. Perhaps explain when they can take it and give more notice if possible.

Cancelling pre-booked holiday or refusing to a request to cancel pre-booked holiday does not come without its risks, being fair and reasonable is always the key.

If furloughed workers do not book any holiday and I do not request that they take any holiday, does holiday leave accrue?

Yes, as employees’ contract of employment remains in force during furlough leave holiday will accrue during the furlough period.

If you provide additional contractual holiday, above the 5.6 week statutory amount, you can ask employees to agree this will not accrue during a period of furlough however in reality most are unlikely to agree to this.

I’ve only a few employees designated as furloughed but with my remaining staff I have been unable to allow them to take holiday because they have been needed to work – what happens to their holiday?

Workers who have not taken all of their statutory annual leave entitlement by the end of the current holiday year, due to COVID-19 impact, have a new legal right be able to carry it over into the next two holiday years, this is for all employees furloughed or not.

The rules say that it must be ‘not reasonably practicable’ for the worker to take some, or all, of the holiday to which they are entitled due to the coronavirus. If so, they can carry four weeks forward for two years. The remaining 1.6 weeks of holiday can be carried forward by one year by agreement.

What happens to accrued holiday if I end up making an employee redundant?

If you make an employee redundant now or in the next 2-year period, you should pay them in lieu for any accrued but untaken holiday inclusive of any carry over within the new provisions. This calculation must include any statutory holiday they were unable to take due to sickness, maternity or because of coronavirus. This would be paid as a lump sum in their final pay, as normal.

This factsheet has been created on Monday 27th April 2020. Please note that details are subject to change. Updates will be created and issued as and when available.


To find out more about the Coronavirus Job Retention Scheme or if you require further help and guidance when it comes to furlough and holidays, please don’t hesitate to get in touch with the Streetwise HR team today on 0844 682 7488

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