Holiday Pay for Furloughed Workers Clarified

The government has recently issued guidance on furloughed workers’ holiday entitlement and holiday pay during the coronavirus pandemic, a topic employers have long been seeking clarification on. We summarise the key points to note from the guidance.

Key Points

• Workers continue to accrue statutory and contractual holiday (unless agreed otherwise) while on furlough leave.
• Workers on furlough can take holiday without disrupting their furlough.
• Employers can require workers to take holiday or can refuse a request for leave during furlough.
• Notice requirements to either require employees to take or prevent them from taking holiday continue to apply during furlough. The required notice periods are:
  • Double the length of the holiday to require specific days off.
  • The length of the planned holiday to cancel or prevent holiday on particular dates.
• Before requiring workers to take holiday, employers should consider if social restrictions would prevent the worker from resting, relaxing and enjoying their leisure time. If not possible, the holiday should be taken at another time.
• Where workers usually work bank holidays and a bank holiday falls while they are on furlough, they will simply receive their furlough pay for the bank holiday.
• For workers who usually take bank holidays as annual leave:
  • Employers can agree they will take the bank holiday as annual leave and receive holiday pay for this day (requiring a top-up to normal pay).
  • Employers can agree the bank holiday can be deferred until a later date, ensuring full holiday entitlement.
• Holiday pay should reflect what the worker would have earned if they were at work. Employers must top up any difference above the furlough pay while continuing to claim 80% from the government.

Carry Forward of Holiday

In certain circumstances, employers must allow workers to carry forward four weeks of statutory holiday into future leave years. The Working Time (Coronavirus) (Amendment) Regulations 2020 permit this where it has not been reasonably practicable to take it due to coronavirus. Factors include:

• Increased demand so the worker is required to continue at work.
• Disruption to the workforce and availability of temporary cover.
• The worker’s health and need for rest.
• Time remaining in the employer’s leave year.
• Impact on society’s response and recovery from coronavirus.
• Ability of the remaining workforce to cover the worker on leave.

For example, if an employer cannot fund the difference between furlough pay and holiday pay, it may be not reasonably practicable for the employee to take leave and they can carry it forward.

Top Tips for Employers

• Ensure workers can take as much leave as possible in the relevant leave year.
• Allow workers to take carried-forward holiday as soon as possible.
• Let workers take holiday accrued in the new leave year first; carried-over holiday can then be taken in the next two leave years.
• Have a valid reason to refuse carried-over holiday on specific dates.
• It is best practice to notify workers of carried-forward holiday and the amount.
• Normal rules around payment in lieu of holiday apply on termination of employment.

Agency Workers

Holiday rights for agency workers remain unchanged while on furlough. Agency workers continue to accrue holiday between assignments, and those with worker status can take holiday during furlough. Contracts for services without holiday entitlement should be checked for provisions during furlough. While the guidance suggests agency workers may carry forward holiday, detailed rules align with those for other workers.