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Holiday and Furlough

As we approach the Easter weekend and a further two bank holidays in May, all during the period of the job retention scheme, we have collated a few points for you to consider.

Does Holiday continue to accrue during furlough?

Yes, as employees remain employed during furlough leave, statutory holiday will accrue during the furlough period.

The statutory minimum holiday of 5.6 weeks per year will accrue, but the precise amount of holiday left will depend upon how much holiday the employee has already taken. If the employer provides contractual holiday, above the statutory amount, employers can ask the employees to agree this will not accrue during furlough.

What are the carry-over rules?

Carry-over rules have been relaxed during these exceptional times to allow employees to carry over up to 4 weeks’ paid holiday over an extended 2-year period.

The provision is that up to 4 weeks holiday can be carried over from the relevant holiday year for up to 2 years if it is ‘not reasonably practicable’ to take the leave as a result of the effects of Coronavirus, including the effects on the worker, the employer or the wider society.

Can someone be on holiday and on furlough?

The treatment of holiday has not been clearly outlined in the government guidance.  You may therefore decide the simplest approach is to cancel all holiday booked during furlough and not to accept any requests during the furlough period.  This includes the forthcoming bank holidays in April and May.

If you allow holiday, the problem that may arise is whether by taking annual leave this interrupts the period of furlough – which must last for at least 3 weeks for reimbursement to be made.  For example, if an employee is on furlough for 2 weeks, then takes 2 weeks of holiday and then a further 4 weeks of furlough, it may be that the first two weeks of furlough will not be reimbursed. We do not have clear guidance from the government on this point and accordingly if any employer grants holiday during a period of furlough there may be a risk that they will not be able to make a claim for this period.

Employers can of course refuse employees’ holiday requests, so an employer can say no to a request for holiday in what would otherwise be a furlough period. The employer must give as much notice of a refusal as the amount of leave requested, so two weeks’ notice if the leave requested was for two weeks.

However, employers may prefer employees to use up their holiday allowance rather than storing it up.

What about holiday pay whilst on furlough?

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, commission and bonuses, meaning employees do not get less pay when they are not working.

Depending on the wording of the contract, most employees have to agree to be furloughed, especially if the employer is not topping up their pay. Therefore, an employee who is worried about the drop in income may propose taking holiday between two dates on full pay, but then only agree to be furloughed before or after that time. If the employee does this, then the employer should pay full salary for the holiday part of the period.

The government guidance does not address if furloughed workers can cash in holiday to top up their 80% salary pay, if the employer has chosen not to top up the pay anyway.

In the absence of express guidance, employers who force furloughed employees to take holiday can claim the 80% grant money from HMRC for employees on holiday leave as they are not at work and not working.

However, it seems employers have to top the holiday pay up to the full salary amount in contrast to the furlough period where that is optional. This need to top up applies for at least the four weeks EU minimum leave. For the remaining 1.6 weeks there is a potential legal argument that an employer could get the employee to consent to just being paid the 80% but employers should probably pay the full amount for the entire holiday period too. This is consistent with clearer advice within the government guidelines that an employer can claim enhanced contractual maternity (and other family friendly) pay through the furlough scheme. This suggests that employees can be furloughed and on maternity (or other family) leave at the same time. This is in contrast to the position on sick leave. Employers who have employees on maternity (or other family-related) leave and in receipt of pay in excess of the minimum statutory payment will want to ensure that they make a claim for the difference.

The guidance is not clear on the relationship between furlough and holiday, the interrelationship is untested and further advice may need to be taken if a problem arises.

If you would like further guidance or support on this matter or require advice on other absence management matters please contact Clover HR on 0121 516 0299 or email us at info@cloverhr.co.uk

Copyright Clover HR


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