Holiday Pay Whilst On Furlough Leave

We have been asked lots of question about how annual leave effects furlough and what should be done with bank holidays, etc. Late on Friday 17th April 2020 HMRC updated their guidance and gave us the information to now answer your holiday questions.

Do employees accrue holiday whilst on furlough leave?

Yes employees will still accrue holiday whilst on furlough leave as per their employment contract. You and your employees can agree to vary holiday entitlement as part of the furlough agreement, however almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below.

Can employees carry holiday over into a new holiday year?

The government has introduced a temporary new law allowing employees and workers to carry over up to 4 weeks’ paid holiday into their next 2 holiday leave years. This law applies for any holiday the employee or worker does not take because of coronavirus, for example if:

  • they’re self-isolating or too sick to take holiday before the end of their leave year
  • they’ve had to continue working and could not take paid holiday

You are now able to allow your employees to carry over holiday if they’ve been ‘furloughed’ and cannot reasonably use it in their holiday year.

What happens if employees have pre-booked holiday and have now been furloughed?

Employees can still take holiday whilst on furlough, and still be eligible for the coronavirus job retention scheme at the same time. This would mean calculating there holiday days and paying them at their normal rate of pay as below.

How much do I need to pay my employees if they are on furlough leave and holiday at the same time?

Working Time Regulations require holiday pay to be paid at the employee’s normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received by the employee in the previous 52 working weeks. Therefore, if a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations.

How much can I claim if my employees are on annual leave whilst furloughed through the coronavirus job retention scheme?

You can claim back 80% of employees salary up to a maximum of £2,500 even if they are on holiday whilst furloughed, but you must top up to 100% for the time they are on holiday.

My employees don’t usually work bank holidays, but they are currently on furlough. What should I do about the Easter bank holidays?

All employees are entitled to at least 5.6 weeks off per year, and many employers include bank holidays within that total. You have two choices with the recent bank holiday: 1) pay the employees at 100% for the two days, or 2) pay them 80% for the two days and then add two days back onto their annual leave allowance to take later in the year.

HMRC have also stated: “During this unprecedented time, we are keeping the policy on holiday pay during furlough under review”

If you’d like to talk through your specific circumstances, speak to a member of our HR team.

Posted in Blog, HR.