Furlough, Annual Leave and Bank Holidays – update
15th May 2020
by Louise Farrell
The Government has extended the furlough scheme by four months, until the end of October 2020. There will be no changes to the scheme until 31 July. From August the scheme may change to allow furloughed employees to be brought back part-time to assist employers to build their businesses back up.
Full details of these changes will be published by the end of May and I will update you then.
We know already that employees on furlough continue to accrue annual leave and bank holidays in the normal way. The Government clarified that employers could require staff to take holiday while they are furloughed. There are a number of options to think about for dealing with annual leave and bank holidays while employees are on furlough:
Option 1
There has been an emergency ‘coronavirus’ amendment to the Working Time Directive, to allow workers to carry over up to 4 weeks statutory holiday into the next two leave years, where the impact of the virus has meant they could not take it during the current holiday year. This allows employees (with the agreement of their employer) to delay taking their accrued holiday and spread it over the next two years. This helps spread the “glut” of accrued holiday rights. It only applies to the statutory minimum holiday and not to any contractual holiday employers give in excess of this. The rules in your contract of employment still apply to the contractual holiday.
Option 2
Employers can also require employees to take holiday during a period of furlough, without bringing the period of furlough to an end, provided the employee is paid 100% for those days. This option brings increased flexibility for employers by ensuring furloughed workers do not return with excessive amounts of annual leave to take and, from a financial position, also means the Government is subsiding 80% of the holiday pay, assuming employers can afford to make the 20% top up.
There has been a lot of debate between lawyers about option 2. The discussion has been around whether requiring employees to take holiday during furlough is fair and reasonable. This weeks’ guidance helps with this by stating that employers should consider whether the aim of annual leave (‘rest and relaxation’) is met if someone takes annual leave during furlough due to restrictions to socially distance or self-isolate.
So how do we interpret that? Employees may be able to claim the decision was unfair because the lockdown did not enable them have a proper holiday to ‘rest and relax’. If they won their tribunal claim, employers would have to re-credit employees with the days they required them to take during furlough – in effect, being in the same position as option 1. It is hoped however, that employees will see this option as one of the ways employers are trying to prevent redundancies and so they will agree to taking some holiday during their furlough leave. The key is in the communication to employees – as usual.
If employers want their employees to take some holiday while they are furloughed they should:-
- talk to employees beforehand
- explain their reasons for wanting employees to take some leave.
- gain their agreement where possible. For employees struggling financially on 80% of pay, this should be an easy decision
- issue written notice to the employee that they must the holiday. This notice must be double the length of the holiday the employee is required to take. For example, if employers want employees to take one week off in June, they would need to give them at least two weeks advance notice of this requirement.
Bank holidays
For furloughed workers who usually take bank holidays as part of their annual leave, employers have the same two options:
- to either require employees to take the bank holiday as part of their annual leave and be paid a 20% top up,
or
- defer the bank holidays to be taken at another time.
Further guidance
If you would like to discuss how this affects you or would like some further support in the form of agreements or letters, please get in touch.
Finally, below is the link to the full Government guidance:
https://www.gov.uk/guidance/holiday-entitlement-and-pay-during-coronavirus-covid-19
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