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Annual Leave and Furlough - Top 10 FAQs

The Coronavirus pandemic has raised many questions for employers and one of those is the question of annual leave for employees that are furloughed. Our latest blog features frequently asked questions in relation to how holiday entitlement and pay operate during the pandemic.

It’s designed to help employers understand their legal obligations in terms of workers who have been placed on furlough under the government’s Coronavirus Job Retention Scheme (CJRS).

1. Do workers on furlough still accrue annual leave?

Yes. Workers will continue to accrue annual leave in the normal way.

2. Can a worker be on furlough and take annual leave at the same time?

Yes. Government guidance makes it clear that a worker can be on furlough and annual leave at the same time, but employers will be expected to ‘top-up’ any grant they are in receipt of under the CJRS, so that the worker is paid their usual rate of pay on any annual leave days.

3. What will a furloughed worker be paid for annual leave?

If a worker takes annual leave while on furlough, they should be paid in line with what they would have earned, had they been in work and working.

Employers are able to use the grant under the CJRS to cover 80% of a worker’s holiday pay, so the government will cover most of the cost of this. However, employers must ensure they ‘top up’ the 80% grant, so that the worker will be in receipt of full pay.

The rate of holiday pay should be calculated in line with current legislation (see here) and be based on a worker’s usual earnings.

4. Does furlough terminate if I process a worker’s annual leave?

No. Processing annual leave will not interrupt or terminate a period of furlough.

5. Am I allowed to force a furloughed worker into taking annual leave?

Subject to an employer giving the correct notice, they can require a worker to take annual leave while they’re on furlough.

The notice an employer must give is twice as long as the leave they wish to impose on the worker (for example, if an employer required a worker to take 3 days’ annual leave, they would need to give 6 days’ notice of this).

Although the guidelines make clear that it is acceptable for an employer to require workers to take annual leave while they’re on furlough, they also state that employers should consider any restrictions the worker is under, such as the need to self-isolate or socially distance, which would prevent the worker from resting, relaxing and enjoying leisure time.

6. My worker is arguing that they do not wish to take holidays while on furlough, preferring to save them for a later date.

As above, employers are able to require workers to take annual leave while they’re on furlough. However, consideration should be given to not enforcing annual leave on workers who provide a valid argument around being unable to sufficiently rest and enjoy leisure time.

For any cases where it is deemed not appropriate for a worker to take annual leave on furlough, those workers can take their leave at a later date and, in some cases, carry that leave over to another holiday year (see next question).

7. Is a worker able to carry over annual leave if they have been unable to take it?

Yes. New emergency legislation (The Working Time (Coronavirus) (Amendment) Regulations 2020) allow workers to carry over 4 weeks of their statutory leave entitlement into the following 2 leave years, where the effect of coronavirus has meant it was not reasonably practicable to take the leave in the year it which it relates. More guidance on what is deemed ‘reasonably practicable’ can be found here.

If you find as an employer that there is a large excess of carry-over holiday from 2020 to 2021 across your staff, a way of managing this could be to communicate to staff that they need to take so many days carry-over holiday by a certain time. For example: 40% of the carry-over holiday must be taken by the end of March 2021.

8. If a worker hasn’t been able to take their annual leave, can we just pay them for it?

This could only be possible for an enhanced/contractual element of a worker’s annual leave entitlement if the worker is in agreement with it. Employers are not permitted to pay a worker a sum to cover any statutory leave they have accrued but not taken (workers must take their statutory entitlement off work). For example: if an employee has a contractual entitlement to 35 days’ holiday in the year and takes 30 days, an employer can agree to pay the employee in lieu of the extra week’s holiday that has been accrued but not taken. To be clear though, this only applies to enhanced/contractual holiday, i.e. holiday that is over and above the statutory entitlement of 5.6 weeks (28 days).

9. How do bank holidays work on furlough?

A worker’s furlough is unaffected if a bank holiday falls on a day the worker would usually have worked. However, if the worker would usually have had the bank holiday as annual leave, the bank holiday could be taken as annual leave or be deferred until a later date.

10. What happens if a worker on furlough does not want to take a pre-booked holiday?

A worker on furlough may decide they do not wish to take a pre-booked holiday. However, the employer can still insist on the worker taking that leave. As above, the employer must give consideration to the worker’s specific circumstances, including whether the worker has an argument for not being able to relax and enjoy their leisure time.