Furlough and Annual Leave - What Does the New Guidance Say?

Some employers’ queries in relation to annual leave and furlough have been clarified in new government guidance published on 13 May 2020.

The guidance is not legally binding and employment tribunals will not be obliged to follow it when deciding cases about holiday pay, however, the guidance is designed to help employers understand their legal obligations.

Does holiday entitlement continue to accrue whilst employees are on furlough?

It confirms that holiday entitlement will continue to accrue whilst employees are on furlough, as well as any additional holiday entitlement provided for under their contract of employment continuing to accrue in the usual way.

Can employees take annual leave whilst on a period of furlough?

Workers on furlough can take holiday without this disrupting their entitlement to the grant. The usual notice requirements still apply in this regard so that the notice should be double the length of the holiday being required to be taken, if the employer wishes to require a worker to take holiday on particular days. Employers can ask workers to take or cancel holiday with less notice but need the workers’ agreement to do so.

However, the caveat in the guidance is that it states that the employer should consider whether any restrictions the worker is under, such as the need to socially distance or self-isolate, would prevent the worker from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday. This of course brings into question whether anyone is able to “rest and relax” during a global pandemic, but it is mostly probably going too far for employees to prove that this was the case to say that they were unable to take annual leave for this purpose.

Employers should be open and honest with employees around the reasoning why they are being asked to take the annual leave, to help prevent any confusion or angst from employees.

How much should employees be paid whilst on annual leave during furlough?

The guidance confirms that where holiday is taken on furlough, it should be paid in line with current legislation and so the same as would have been paid to them when they took annual leave if they weren’t on furlough.

Employers are still entitled to claim through the scheme for the furloughed employees even when they are on annual leave, but employers need to “top-up” the payment to ensure they are receiving the pay they are entitled to whilst they are on leave.

What happens with bank holidays during furlough?

The guidance logically states that where an employee would normally have worked on a bank holiday, then this does not affect their period of furlough. It gives options where an employee would usually have the bank holiday as annual leave and that is for either it still to be taken as annual leave (and paid accordingly) or for that day to be deferred, ensuring that the employee still has their full entitlement to annual leave.

Can any accrued but untaken holiday be paid in lieu?

It states that any leave carried over into the next holiday year, and presumably any untaken leave, is still subject to the usual rules around payment in lieu. That is that an employer must facilitate the employee to take their annual leave and must not replace this with a financial payment. It is only when an employee leaves employment that the employer must make a payment in lieu for the accrued but untaken annual leave.