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The first reference to annual leave entitlement in the government guidance on the Coronavirus Job Retention Scheme (CJRS) was in the update of 17 April 2020.    A relatively short passage in the updated guidance confirmed that workers continued to accrue annual leave while on furlough, and that they are entitled to take leave during this time. In addition, holiday pay while on furlough should be paid at ‘your usual holiday pay in accordance with the Working Time Regulations’, and that ‘employers will be obliged to pay the additional amounts over the grant’ to employees on annual leave while on furlough leave.

This suggested that where furlough pay is 80% of normal wages or at the £2,500 cap, the employer will be required to make this up to 100% of normal (i.e. pre-furlough) wages for any period of annual leave.

On 13 May 2020, the government published further guidance on workers’ entitlement to holiday and holiday pay. The guidance, ‘Holiday entitlement and pay during coronavirus (COVID-19)’, seeks to explain the operation of holiday entitlement and pay during the COVID-19 pandemic. It addresses the position of employees on furlough leave under the CJRS and employees who continue to work.

The key points of the guidance are as follows:-

  • Furloughed workers continue to accrue entitlement to annual leave under the Working Time Regulations 1998.
  • Furloughed workers can take annual leave without bringing the period of furlough to an end.
  • Holiday pay must be paid at the correct rate in accordance with current legislation. It notes that, where this calculated rate is above the furlough rate of pay, the employer will have to pay the difference but will still be able to claim up to 80% (or £2,500 per month) under the CJRS.
  • Employers can require workers to take holiday while on furlough but the guidance notes that ‘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’.

The further guidance also makes reference to the Working Time (Coronavirus) (Amendment) Regulations 2020, which came into effect on 26 March 2020. These Regulations provide that where it has not been reasonably practicable for a worker to take some or all of the basic four weeks’ annual leave due to the effects of coronavirus, the untaken amount may be carried forward into the following two leave years. In relation to whether or not it has been “reasonably practicable” for a worker to take annual leave, the guidance indicates that an employer should consider factors such as:-

  • Whether the business has faced a significant increase in demand due to coronavirus that would reasonably require the worker to continue to be at work and whether this demand cannot be met through alternative practical measures;
  • The extent to which the business’s workforce is disrupted by the coronavirus and the practical options available to the business to provide temporary cover of essential activities;
  • The health of the worker and how soon he or she needs to take a period of rest and relaxation;
  • The length of time remaining in the worker’s leave year, to enable the worker to take holiday at a later date within the leave year;
  • The extent to which the worker taking leave would impact on wider society’s response to, and recovery from, the coronavirus situation; and
  • The ability of the remainder of the available workforce to provide cover for the worker going on leave.

The guidance states that:-

“Employers should do everything reasonably practicable to ensure that the worker is able to take as much of their leave as possible in the year to which it relates, and where leave is carried forward, it is best practice to give workers the opportunity to take holiday at the earliest practicable opportunity.”

In relation to employees that have been furloughed the guidance states:-

“Workers who are on furlough are unlikely to need to carry forward statutory annual leave, as they will be able to take it during the furlough period. However, to do so they must be paid the correct holiday pay which is likely to be higher than the rate of pay that will be covered by government grants, with the employer making up the difference.”

However, if, due to the impact of coronavirus on operations, the employer is unable to fund the difference between furlough pay and holiday pay, it is unlikely for it to be reasonably practicable for the worker to take the leave, enabling the worker to carry it forward under the Regulations.

Please note, that whilst employers may welcome further clarification, the  guidance has no legal effect and Employment Tribunals will not be required to follow it when deciding working time and holiday pay cases.

Link to guidance: https://www.gov.uk/guidance/holiday-entitlement-and-pay-during-coronavirus-covid-19

Our Employment Team are available to discuss the specific circumstances applicable to your business.

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