Furloughing: Guidance on holiday pay

Over the last few days there have been some new updates in regards to holiday rules. It has been confirmed that holiday entitlement will still be accrued if an employee has been furloughed, and the government have introduced a temporary law to deal with the coronavirus disruption, where employees will now be able to carry over up to 4 weeks paid holiday over a 2 year period!

On the face of it this appears to open the doors to a problem that could cripple businesses as they attempt to recover from the recession and upheaval in the wake of the pandemic.  There are however some things that you can do to make sure that you are equipped and planning ahead to keep control of the controllable in all of this.

What do I need to do as an employer with this new update?

It is recommended that employers request that their employees take some of their annual leave during a furloughed period to reduce the pressure to an employer’s financial situation and also to staff resourcing when the furloughed period has stopped.  Employers must give the right amount of notice to any employee taking leave, which is equivalent to at least twice the period of leave to be taken.  For example, the employers must give 2 days’ notice to take 1 days leave, to 2 weeks’ notice to take 1 weeks leave.

You would need to make sure that you have been fair in enforcing annual leave during a furloughed period, as you cannot enforce your employees to take all of their annual leave during this time, but to be reasonable with what you are requesting. Unfortunately there will be cases where employees will feel that they have been unfairly treated as they cannot use their accrued time for actual holiday, but as long as you are consistent with what you are requesting and provide the right amount of notice, then this is something worth considering.

The area that is still being debated is the 20% top up.  At the moment an employer would be able to claim the 80% back for accrued holiday, as this will not affect the furloughed period.  But it is being argued that annual leave is a contractual benefit that would be paid at the agreed salary, therefore it could be the case that an employer would need to top up the 80%, by paying the extra 20% for any annual leave taken.  Therefore if you decide to enforce compulsory leave, you may need to consider if you have the cash flow to be able to pay the extra 20%.

Alternatively, if the work flow is starting to reduce, you may decide to enforce a shorter working week, with the remaining days to be taken as annual leave. The employee would still receive their full salary and should be happy, whilst you manage to decrease the accrued holiday entitlement to prevent any time having to be carried over, or requested later in the year when you are trying to build the business following the lockdown period.

If you are unable to give notice for taking any accrued annual leave, and you do not have a current policy outlining the procedures for carrying over any holiday entitlement, then the temporary law can be included to inform your employees that they have up to 2 years to take any holiday that they have accrued, but unable to take due to the coronavirus disruption.  This change would have to be communicated out to your employees, if you decide to include this temporary law and to confirm with your employees that holiday can be requested, but there is no guarantee that it would automatically approved due to the business needs and requirements.

The carry over of accrued holiday could include the following:

• they’re self-isolating or are too sick to take holiday before the end of their leave year
• they’ve been temporarily sent home as there’s no work (‘laid off’ or ‘put on furlough’)
• they’ve had to continue working and could not take paid holiday

If an employee or worker leaves their job or is dismissed during the 2-year period, any untaken paid holiday must be added to their final pay (‘paid in lieu’).

If someone is temporarily sent home because there’s no work 

If you send an employee home because there is no work they will continue to build up (‘accrue’) holiday in the usual way.

Bank holidays

If employees and workers cannot take bank holidays off due to coronavirus, they should use the holiday at a later date in their leave year.

If this is not possible, bank holidays can be included in the 4 weeks’ paid holiday that can be carried over. This holiday can be taken at any time over a 2-year period.

Previously booked holidays

If an employee no longer wants to take time off that they have previously booked, for example because their holiday’s been cancelled, you as the employer may still tell them to take the time off, but make sure you initiate the correct notice to ensure you receive their agreement and you can demonstrate you have been fair in this request.

If the employee wants to change when they take this time off, they’ll need to get agreement from you, if you are in agreement that this time can be carried over or booked again later in the year.

If you have any further queries regarding accrued holidays for your employees, please email me at donna.bygrave@a4g-llp.co.uk, or call the office on 01474 853856.