Furloughed workers and annual leave

The government has provided some long awaited guidance on the treatment of annual leave for furloughed employees affected by the coronavirus pandemic.

One of our senior employment lawyers, Jenny Hawrot, summarises the updated guidance which clarifies some areas that have been subject to much discussion over the past few weeks. The guidance is comprehensive, and is likely to be the final word on the treatment of annual leave and furlough.

Holiday accrual

Workers who have been placed on furlough leave will continue to accrue all statutory and contractual holiday entitlement in the usual way.

Taking holidays

Employers can require workers to take holiday whilst on furlough (provided they pay them correctly – see more below). Equally, employers are able to cancel workers’ booked holiday. If an employer wants to do either of these things, they will have to give the required notice which is:

• double the length of the holiday if the employer wishes a worker to take holiday on particular days eg. 2 days holiday = 4 days’ notice, 5 days holiday = 10 days’ notice etc.
• the length of the planned holiday if the employer wishes to cancel a worker’s holiday or require the worker not to take holiday on particular dates eg. 2 days’ notice for 2 days cancelled.

The employer can give less notice, but only with the worker’s express agreement.

Workers can opt to take holiday during furlough leave, in the usual way.

Bank holidays

If a bank holiday falls during a period of furlough and the worker would have usually worked the bank holiday, their furlough will be unaffected by the bank holiday.

However, if workers are contractually entitled to time off for bank holidays, and wouldn’t usually work, the furloughed worker will be deemed to be on annual leave for that day, (and should be paid correctly – see below) or the day off should be deferred to a later date. The worker and employer should seek to reach an agreement on this.

Holiday pay

If a worker on furlough takes annual leave, an employer should pay the worker the correct holiday pay in accordance with current legislation. The correct holiday pay is calculated as follows:

• For fixed rate (usually salaried) workers it is their normal daily salary.
• For workers with variable pay it is their average daily pay, calculated over the previous 52 weeks.

The holiday pay principle is that pay received by a worker while they are on holiday should reflect what they would have earned if they had been at work and working.

The employer can continue to claim the 80% furlough grant from the government to cover most of the cost, but will need to ‘top up’ the worker’s pay to cover the full holiday pay entitlement, as calculated above.

Carry over leave

In ‘usual’ circumstances, workers are not permitted to carry over any statutory annual leave (4 weeks for full time workers) from one holiday year to another (unless they have been absent from work on specific types of leave).

However, the government has passed new emergency legislation to enable workers to carry statutory holiday forward where the impact of coronavirus means that it has not been reasonably practicable to take it in the leave year.

If this is the case, workers can carry forward some or all of the 4 weeks’ statutory holiday into the following 2 leave years.

Employers must, however, still give workers the opportunity to take, before the end of the leave year, any other leave that they cannot carry forward (eg. any other leave, over and above the  4 weeks’ statutory minimum, for example, contractual leave). 

For furloughed workers, in principle, it will be reasonably practicable for them to be able to take their statutory leave during the period of furlough leave when they are not working. If this is the case, and the employer is able to pay the ‘top up’ holiday pay, as above, the furloughed worker will not be able to carry the statutory leave forward.

However, where an employer is unable to fund the ‘top up’ holiday pay, due to the impact of coronavirus on the business, it is likely that this would render it to be ‘not practicable’ for the worker to take the statutory leave and they may carry it over for up to 2 years.

Remember, the extension of carry over holiday is limited to 4 weeks’ statutory holiday, so the worker must still be given the opportunity to take their other annual leave, at the correct holiday pay.

Employers cannot make a payment in lieu of the carried forward leave, except on termination of employment. The leave must actually be taken, unless their employment ends.

Also, remember, it is unlawful to prevent workers from taking holiday to which they are entitled. It’s therefore good practice to inform workers of their right to carry holiday forward.

To read the guidance in full, please visit the government’s website.

We’re here to help

We appreciate that it is a confusing and uncertain times for employers, but we’re here to help.

Our employment law team is fully equipped to advise you on your rights and obligations in this most unusual situation and how best to implement this guidance across your workforce.

Our legal services are operating as normal, with all of our lawyers able to work safely from home.

Please call 01242 514000 or email Jenny Hawrot in our employment law team and we will be delighted to help.

We’re regularly updating our website with more COVID-19 legal insights, so keep an eye on this page for the latest legal perspectives relating to the coronavirus.