Holiday and furlough - the unanswered questions

On Monday the government published employer and employee guidance on its Coronavirus Job Retention Scheme. Since then lawyers, HR professionals and employer organisations have tried to fill in the gaps to help our clients understand what is expected of them.

The sad fact is that we still don't have all of the answers to the questions we are asked because the guidance simply doesn't address them! The Chancellor is running an event on twitter this afternoon called #AskRishi and we may know a bit more after then. 

Status of guidance

It's important to remember that the guidance is not a set of Regulations. The language used is not precise and the words and expressions used don't necessarily have a technical meaning. There's also bound to be inconsistencies. 

Additional guidance is being prepared by BEIS. All we know is that it will be published 'soon' and we'll let you know as soon as it has been.

For now, we outline the issues around holiday that are unclear and provide our provisional views.

Does holiday continue to accrue during furlough?

We believe so. However, there is an argument (which relies on EU law) that holiday doesn't accrue during periods when someone is not actually working - unless they are ill. Previous ECJ decisions have held that leave didn't accrue during a period of parental leave or when someone was not required to work for a period of 18 months. 

Holiday is a safety and health issue and, is important because it helps people get enough rest and keep keep healthy (physically and mentally). If a furloughed employee is not actually working, why do they need to accrue holiday? Against that view, is the Court of Appeal's decision in Harpur (relying on the Working Time Regulations rather than the Directive) which held that a term-time only teacher must receive 5.6 weeks leave each year even though she didn't work a complete year. 

The safest approach is therefore to assume holiday continues to accrue.

Can employees take holiday during furlough or does it interrupt it?

It's really not clear. Some commentators, such as the excellent Daniel Barnett in his helpful (and for a short time free podcast) believe workers can be on furlough and annual leave at the same time. In other words, you don't have to break the furlough, put someone on leave and then put them back on furlough.

This is an extremely important issue for employers, particularly for those whose staff whose bank holidays are included in their holiday allowance. Good Friday is on 10th April and Easter Monday the 13th. Therefore, if that view is incorrect and someone has been furloughed for under three weeks their employer won't be able to claim furloughed wages from the Coronavirus Employee Retention Scheme until they have been furloughed for three complete weeks.

Until we know otherwise, we suggest employers act cautiously. Our furlough letter cancels any pre-booked leave that takes place in the first three weeks and makes it clear that staff can take this later.

How much holiday pay are furloughed employees entitled to?

There's nothing to stop an employer requiring staff to take some paid holiday while they are off work. If they are furloughed, how is this calculated? Is it at the 80% rate or are workers entitled to their 'normal remuneration' which can include pay specifically excluded from the scheme (such as bonuses and some commission payments)?

Our view is that workers should receive their normal pay which should (probably) be based on their actual earnings rather than the furloughed amount. For workers' whose pay varies this has to be calculated by averaging their pay over the previous 12 weeks (52 weeks from Monday 6 April). We believe this should exclude any weeks where the worker was furloughed - but, again, that point is not clear. 

Whether employers can use any furloughed amount to offset holiday payments will depend upon whether the two types of leave are mutually exclusive.

Our advice may change as more information is provided. However if you need to make a decision about furloughing now and want to discuss the best option for your business, please speak to our partner Glenn Hayes. 

Our Coronavirus updates

We're working hard to keep you up to date with legal developments around Coronavirus. We've set up a portal which includes lots of helpful articles and advice to help you.

If you have a query, that we haven't answered, please contact us.