Furlough and holiday - government breaks its silence

Over the weekend the government updated its Employee Guidance on the Coronavirus: Job Retention Scheme. Big fanfare - it includes some information about the interaction between furlough and holiday! The Employer Guidance was also updated (and has been updated again today) but still doesn't say anything about holiday which is most strange. 

The relevant section in the Employee Guidance says this about holiday:

"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."

So, these issues are now clear:

1. Holiday will continue to accrue during furlough.
2. Furloughed staff can take holiday without it interrupting their furlough period. This means that if your staff have pre-booked holiday or are required to take bank holidays off, you don't have to cancel their leave and add it back into their holiday allowance.
3. You can ask your staff to take holiday during furlough by serving notice. However, for the reasons we explained here, we don't think you should ask staff to take all of their holiday when they are forced to remain at home for most of the time.
4. You can use the furlough pay as a contribution towards your employee's holiday pay costs.

Holiday pay

However, the question about how much you should pay someone on holiday during furlough is unclear. The guidance simply says that staff should receive their "usual holiday pay". For salaried staff, that's quite straightforward and will amount to their pre-furloughed salary. 

But what about workers' whose pay varies. Does the 52 week calculation period include or exclude the furloughed wage? Our view is that workers should receive their normal pay which should (probably) be based on their actual earnings rather than the furloughed amount. 

Need specific advice?

Please contact Glenn Hayes if you want advice on holiday pay.

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.