Coronavirus: Guidance for holiday and pay
Updated: 19/05/2020: This helpful FAQ covers new working practices around holiday entitlements, and how to manage employee leave during this pandemic.
Does holiday accrue during furlough leave?
The UK statutory minimum holiday entitlement is 5.6 weeks [28 days for a full time employee], although some employers may contractually allow their employees more holiday than this. Either way, whether you provide a total of 5.6 weeks including bank holidays, or you give your employees more contractual holiday, in both cases the holiday entitlement will continue to accrue whilst your employees are on furlough leave.
Your part time employees who would ordinarily accrue holiday calculated on a pro rata basis will also continue to do so, whilst on furlough leave.
Can I ask my employees to take holiday?
Yes you can. An employer can ask employees to take their holiday by making a request for them to take holiday at a certain time, provided that the employer gives those employees the appropriate statutory notice.
The amount of statutory notice required depends upon the length of the holiday period required. So for example, if you want your employees to take one week of holiday [5 days], you have to give the employee 10 days’ notice, so double the length of the holiday that you wish them to take.
This notice starts in advance of the first day of holiday, so you would have to have given notice in this example, by no later than 11 days before the week’s holiday starting.
It may be possible for employers to avoid compulsory periods of holiday and any negativity that this might cause by engaging with the workforce early on and encouraging employees to book holidays themselves.
Can I ask my furloughed employees to take holiday during furlough leave?
Employees are allowed to take holiday during a period of furlough leave and can choose to book this with you in the usual manner. A period of holiday does not break the furlough leave period.
You can ask an employee on furlough leave to take holiday by providing the same statutory notice as above. Again we would encourage employers to engage with their furloughed workforce and encourage, rather than enforce, holidays.
Can I restrict my employees from taking holiday because we are really busy as a result of COVID-19?
If employers want to restrict when employees can take holiday, they can do so by providing the employee with appropriate notice of that change as above.
If you want to cancel an employee’s pre-booked holiday, you would need to provide them with notice the length of which is no less than the length of the planned holiday that you want to cancel. For example, if you wanted to cancel your employee’s one week holiday, you would need to provide no less than one week’s notice.
In any scenario where the employer wishes for holiday to be taken or wishes to cancel holiday, the best outcomes are often able to be achieved when employees are engaged with and understand the reasons why such decisions are being asked of them.
What do I pay employees who take holiday during furlough leave?
Holiday taken during furlough leave should be paid at 100% employee’s normal rate of pay, even if during furlough leave your employees have agreed to be paid 80% capped at £2,500 per month.
What is normal pay, may depend upon the contractual arrangements that would remain in force. If an employee has a salary with no additions, this would remain their normal pay for holiday pay purposes. Where their hours of work or pay varies, their holiday would be calculated on an average of the previous 52 weeks which would exclude any unpaid weeks.
When it comes to claiming the holiday during furlough from the HMRC furlough Job Retention Scheme, it is at the employer’s own cost to top up to 100%
What happens if a bank holiday falls during furlough leave?
Where an employee usually works a bank holiday, this day can be considered as a normal working day for the purpose of furlough pay. But where an employee usually takes bank holidays as leave days, they would either have to take that bank holiday as leave, and have their furlough pay topped up to 100%, or given a day in lieu to take at a later date.
Can my employees carry over unused holiday to future holiday years?
This question does require a bit of background as this area of the law is quite complex. As we know, the minimum holiday entitlement in the UK is 28 days including bank holidays. This is 5.6 weeks of holiday entitlement. European law allows for four weeks, so in the UK, we get 1.6 weeks more holiday than European law allows for.
Employers wouldn’t normally carry forward unused holiday into future holiday years where this would mean the employee’s holiday entitlement for that year would drop below 5.6 weeks.
There is a quirk in the law that may permit employees to carry over the equivalent of 1.6 weeks [over and above European entitlement] into the next holiday year where there is a written agreement in place between employees and the employer, but given that holiday is governed by the Working Time Directive under heath and safety legislation, and holiday is to allow for proper rest and relaxation, we don’t find that this is often the case, with employer’s generally applying the 5.6 weeks minimum.
So all that said, in response to the COVID-19 pandemic, the government has made an amendment to the holiday legislation, which allows for employees to carry forward up to 4 weeks of holiday from one holiday year, into the following 2 holiday years.
Employers should ensure that they take every reasonable step to allow employees to take holiday in the holiday year that it applies. When employees are carrying forward this much holiday, that they still consider the health and safety implications on that individual’s ability to take proper rest and relaxation away from the workplace. The Working Time Directive and minimum daily and weekly rest periods still apply.
The government has also outlined various considerations such as:
- significant increase in work due to COVID-19 and whether there are other measures that can be taken to allow that employee to take holiday
- the extent of the disruption due to COVID-19 on the business and what options are available to cover essential activities
- the health of the employee and how soon they need to take a period of rest
- how long it is to the end of the holiday year, to allow the employee reasonable time to take their holiday
- the extent to which the employee’s holiday would impact on wider society in regard the COVID-19 response
- the availability of other employees to provide cover for colleagues taking holiday
The full holiday entitlement and pay during COVID-19 can be found here.
Are my furloughed employees allowed to carry forward holiday?
This is an interesting question, because there would be nothing to stop an employee on furlough leave also taking holiday necessarily, but where an employee is furloughed, they should still be given every opportunity to take holiday and/or being given at least the appropriate statutory notice to take holiday, before allowing any holiday to be carried forward.
How does the employer administer carried forward holiday?
Where an employee has been allowed to carry forward holiday into the next holiday year, they will continue to accrue holiday in that next holiday year. The employee will end up with 2 leave entitlements, the holiday that they have carried forward and the entitlement that relates to that new holiday year.
It is important for the employer to be able to differentiate between the carried forward holiday, and the holiday that relates to the new holiday year. The reason for this is:
- that the carried forward holiday is only allowed to be carried forward into the next 2 holiday leave years after which it will expire
- the employer must have a good reason to refuse to allow an employee to take the carried forward holidayYou may wish to request that the employee take the carried forward holiday first, before taking any regular entitlement being accrued in that year.
Can I pay my employees for their un-used holiday, rather than them take it?
It is unlawful for employers to prevent employees from taking their holiday entitlement, so where employers are allowing a carry forward of holiday into the next 2 holiday years, it is important that this is communicated effectively to all employees.
Employers are not allowed to make a payment in lieu of taking holiday unless the employee leaves your employment. This applies to the carried forward holiday balance as well as the holiday accrued in a normal holiday year.
Furloughed agency workers
The Coronavirus Job Retention Scheme does not change any aspect of law in regard to holidays and furloughed agency workers. Where holiday rights exist between the agency worker and the agency employer, these remain unchanged. For example where an agency worker is engaged under a contract of employment by the agency, they retain their rights to holiday entitlement.
Often agency workers are hired on a contract for services basis, which means that whilst on furlough, because they are not treated as workers under those regulations when they are between assignments or not working on assignments, they may not be entitled to accrual of holiday or to take holiday. We suggest that the contract between the agency and the agency worker is reviewed for holiday provisions.
Where the agency worker does have worker status, they are able to take accrued holiday whilst on furlough leave. The employer can make a claim through HMRC for wage costs up to 80% capped at £2,500 a month, with the employer liable for holiday above this figure.
Please note, the information herein is correct as of Wednesday 20 May 2020 but may be subject to change and some elements of business support are devolved and therefore support may differ in Scotland, Northern Ireland and Wales.
For the latest guidance and professional advice, please contact us or speak to your dedicated Duncan & Toplis adviser.