New Government Guidance on Holiday Rights for Furloughed Employees

On Wednesday, the Government offered clarification regarding holidays and furlough leave under the Coronavirus Job Retention Scheme. The full guidance can be found here: https://www.gov.uk/guidance/holiday-entitlement-and-pay-during-coronavirus-covid-19

Key Points

In the guidance the Government has confirmed  that employees (and workers paid through PAYE) will continue to accrue holiday whilst on  furlough leave.  This will apply to their statutory holiday of 5.6 weeks and any additional holiday that the employee may have under their contract.

The Government has also confirmed that holiday will not break a period of furlough. Currently employees must be furloughed for at least three weeks at a time. Previously, there was concern that holiday taken during a period of furlough could break continuity.

Employees must receive full pay if they take holiday during furlough. Employers should be careful to top up a furloughed employee’s pay if holiday is taken (this will not affect employers who are furloughing employees on full pay). This will include bank holidays if they are taken as holiday (see below about controlling the timing of holiday).

Employers can still claim a grant for 80% of an employee’s wages (subject to the relevant cap) if an employee is taking holiday during furlough. However, the employer will have to pay what is necessary to top up the employee’s salary during any holiday.

Controlling the timing of holiday

Employers traditionally have a lot of discretion when it comes to timing of holiday. Employers can insist employees take holiday by giving notice that is twice as long as the proposed holiday. Similarly, an employer can generally refuse a holiday request and it can cancel pre-approved holiday by giving twice as much notice as the length of the holiday that the employee was planning to take.

While employers have discretion on when an employee can take holiday, an employee must be allowed to take his/her statutory holiday within a relevant leave year. In particular, there are strict rules about enabling an employee to take the four weeks of holiday he/she is entitled to under the European Working Time Directive.

However, as part of the response to coronavirus, the Government has introduced greater flexibility for employees and workers to carry over as much holiday as necessary if it was not reasonably practicable to take it. This holiday can be carried over for up to two years. This is likely to be utilised by essential workers who are too busy to be able to take holiday and potentially furloughed workers whose employers cannot afford to top up pay to 100%.

Forcing employees to take holiday during furlough

While some employers, for financial reasons, will want to prevent employees from taking holiday during a period of furlough, others will be equally keen to ensure that furloughed employees do take holiday. If employees continue to accrue holiday until October and don’t take any, the effects of this additional holiday could be quite disruptive.

The Government guidance leaves a question mark about whether employees can be forced to take holiday while on furlough leave. The guidance states: “If an employer requires a worker to take holiday while on furlough, the employer should consider whether any restrictions the worker is under, such as the need to socially distance or self-isolate, would prevent the worker from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday.”

While vague, this guidance suggests that an employee could resist a demand to take holiday during furlough. While it is clear that an employer can ask an employee to take holiday during furlough, it could be a risk  for employers to force an employee to do so. In any event, it could be deemed to be a breach of the implied term of mutual trust and confidence to force employees to take more holiday than they have accrued in a relevant holiday year. We hope to have more guidance on this point soon. Unfortunately, clarity may only be provided by the Tribunal when claims are brought by an employee who has been forced to take holiday.

It should be noted that this is guidance and not law. While a useful indication of government intention, the above could still change when further legislation and treasury directions on the Coronavirus Job Retention Scheme are published.