The guidance issued by the Government so far in relation to the Coronavirus Job Retention Scheme (CJRS) is totally silent in relation to holidays and holiday pay. However, with Easter coming up next week, employers will need to decide how they are going to treat the bank holidays (and holidays in general) for employees who have been furloughed.
Please note that in the absence further guidance and/or legislation from the Government, the advice contained in this alert is not definitive, however, we consider the options are as follows:
1. Agree with employees that their holidays whilst on furlough leave are cancelled and allow employees to take any holiday which has been cancelled, together with that accrued during furlough leave to be taken at a later date. The Working Time (Coronavirus) (Amendment) Regulations 2020 provides for holiday to be carried over to the next two leave years where it couldn’t be taken due to the impact of Coronavirus. If employees do not agree to cancel booked holidays, an employer would need to give them the correct notice to cancel it under the Working Time Regulations 1998 (i.e. the same number of days’ notice as the length of holiday being cancelled).
2. Allow all employees to take holiday during furlough leave in the hope that holiday doesn’t “interrupt” furlough leave and prevent employers claiming the grant for employees who have been furloughed.
3. Require employees to take holiday during furlough leave in the hope that holiday doesn’t “interrupt” furlough leave and prevent employers claiming the grant for employees who have been furloughed. If an employer is requiring an employee to take holiday during furlough leave, the employer must comply with the notice requirements in the Working Time Regulations 1998 (i.e. double the length of notice of the amount of holiday to be taken). HMRC guidance says furlough leave must be for a minimum of 3 weeks, so to exercise this option, an employer would give notice that the final week of a three week period of furlough leave would also be holiday, so that it complies with the notice requirements in the Working Time Regulations 1998.
As stated above the position is not certain. ACAS has taken the view holiday cannot be taken whilst an employee is on furlough leave, see the link to the ACAS guidance here. At the moment we do not know why ACAS has taken this position, unless they know something we don’t.
If you decide on either option 2 or 3, the question arises as to what holiday pay an employee who is on furlough leave would be entitled to? The position remains far from clear. There is already a difference between what holiday pay employees are entitled to for the 4 weeks’ ‘Working Time Directive derived holiday pay’, which includes overtime, commission and other additional payments which form part of normal remuneration and the additional 1.6 weeks’ leave provided for by the Working Time Regulations 1998 where an employee is only entitled to basic pay. At the moment it is almost impossible to predict with any certainty how to pay an employee holiday pay whilst they are on furlough leave. It could be either the 80% an employer may receive as a grant from the CJRS or their normal remuneration (80% topped up to usual pay, including commission, overtime etc).
There is also the risk that if you decide on option 2 or 3 that the holiday “interrupts” the furlough leave, and the employer does not receive any grant under the CJRS.
It would appear that employees can take holiday in between periods of furlough leave (subject to each period of furlough leave being a minimum of three weeks), however, in those circumstances the employer will have full liability to pay their holiday pay as usual.
Obviously, employers are going to have to take decisions on how to treat the upcoming bank holidays, without the benefit of further guidance.
From a practical point of view, it would seem to make sense that employees could take holiday whilst on furlough leave. The purpose of annual leave is to make sure employees receive sufficient rest. Given that furloughed employees are not required to do any work this would not seem to be incompatible with them also taking annual leave. However, the cautious approach would be to choose option 1 above, in the absence of any further guidance from the Government, to avoid the risk of missing out on CJRS grants.
If you have any queries, please do not hesitate to contact our employment team on 01228 552600 or 01524 548494.
This alert does not provide a full statement of the law and readers are advised to take legal advice before taking any action based on the information contained herein.