I thought it would be helpful to answer some frequently asked questions about how to treat annual leave for furloughed employees.
1. Can employees take holiday whilst they are furloughed?
Yes. This has been confirmed by the Government and previously indicated by ACAS. Employees can request and take annual leave whilst they are furloughed.
2. What should I pay employees who take annual leave?
The law on holidays has not changed and so any annual leave must be paid at the employee’s normal salary rate i.e. 100% of their usual pay. If employers don’t do this, they risk claims from affected employees for not meeting their responsibilities towards annual leave and holiday pay.
The guidance confirms that 80% (maximum £2,500 per month) of this pay can be claimed via the Job Retention scheme for those who are furloughed, the remainder must be paid by the employer.
3. What about Bank Holidays?
If Bank Holidays are given in addition to annual leave entitlement, then you would need to ensure that any furloughed employees were paid at 100% for the recent Bank Holidays. (This assumes those employees still working received 100% of pay and did not report to work on the Bank Holidays).
If Bank Holidays are normal working days, and employees do not automatically get the day off, then they are not affected and should request leave in the usual way.
It will depend on your contract of employment how Bank Holidays are treated, and if they are within, or in addition to, annual leave entitlements.
In the alternative, for furloughed staff, you could continue to pay them at their furloughed pay rate and defer their entitlement to the Bank Holiday to a later date.
4. Can I insist employees take annual leave?
Yes. However, you must give employees notice if you want them to take annual leave. The notice must be at least twice as long as the holiday you want them to take. For example, if you want an employee to take 5 days, you need to give 10 days’ notice. This is a legal right the employer has, and the employee cannot object to this.
This will support employers in managing leave entitlements during lockdown and planning for when the business returns. My advice is to look at requesting employees to take leave to avoid having a workforce with large amounts of leave to take.
5. So, I can ask employees to take all their entitlement?
No. Any requests the employer makes should be reasonable. Given that the purpose of annual leave is to have a break and rest from work, employers should bear in mind that their workforce will need some annual leave for when work returns.
For furloughed employees my advice is to look at taking 1/12th of their entitlement for each month they are furloughed. For employees who are not furloughed Managers should encourage those staff to book leave and take a break from work.
6. So are there any restrictions on when I can ask an employee to take their annual leave?
Other than the required notice period, you should consider whether any restrictions the worker is under, such as the need to socially distance or self-isolate, before requesting they take annual leave. These restrictions may prevent an individual from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday. Given the ease in restrictions announced from w/c 11 May it is difficult to see many situations where an employee could argue that asking them to take leave would prevent them from resting or enjoying time away from work.
7. My employee wants to cancel annual leave already agreed. Do I have to accept this?
No. You do not have to accept their request. Given that holiday and travel plans have changed for all of us, you may wish to be flexible, but there is no requirement to accept cancellation requests.
8. Can we refuse annual leave requests because we anticipate being busy?
Yes. The employer has the right to decline any annual leave requests submitted. Employees should always be reminded that travel or other plans should not be made until annual leave requests are agreed.
If you anticipate a key business period where you will not be able to facilitate annual leave requests, my advice is to communicate this to employees and advise that you will not be able to agree requests during particular dates. This will provide an opportunity for employees to book leave for other times in the year.
9. Does annual leave continue to accrue during furlough?
Yes. My previous advice has suggested this, but the Government guidance confirms that statutory annual leave continues to accrue. Contractual annual leave entitlements should also accrue, unless you have agreed to alter the terms of an employee’s contract. (It cannot go below the statutory minimum of 5.6 weeks however).
10. What about leave carry over? The Government has changed the law.
On 27 March the Government announced a change in the Working Time Directive that allows employees to carry over more annual leave into future annual leave years. However, employers should note the detail:
This relates to the 5.6 weeks statutory leave entitlement.
Before 27 March 1.6 weeks could be carried forward to the next annual leave year with the employer’s agreement. Following the change in law workers are now able to carry over up to 4 of those weeks to the next two leave years.
Crucially, this is if it is not ‘reasonable practicable’ for an employee to take their statutory leave entitlement in the current leave year due to Coronavirus.
This change does not mean there is an automatic right for every employee to carry over annual leave to the next two leave years.
If the employer can facilitate the employee taking their statutory annual leave, the employee must take it, or risk losing it. This legalisation only applies to statutory leave, not any leave entitlements in addition to 5.6 weeks.
In all cases the employment contract prevails. If your contract prevents any annual leave to be carried over, and there is sufficient opportunity within the annual leave year for employees to take their leave, then you are not obliged to consider requests to carry over annual leave.
It is important to note that the change in law was intended to provide flexibility to allow workers to carry over leave at a time when granting annual leave could leave employers short-staffed in some key industries, such as food, health and social care. Whilst travel and holiday plans have been significantly impacted by Coronavirus, this in itself does not prevent the employee requesting and taking annual leave.
11. What about annual leave and sickness?
The situation with sick leave and annual has not changed. (It cannot be taken during sick leave and continues to accrue).
Finally, my advice is to write to employees outlining this information and communicate your expectations around annual leave arrangements. Depending on when your annual leave year runs, this will give employees sufficient time and notice to make arrangements to take their annual leave entitlement. This will also help to manage leave requests and avoid issues with employees misunderstanding their legal rights around annual leave.
The guidance is here and it might be useful to forward to your members of staff who are furloughed to update them on the Government’s advice.
Please get in touch if you have any queries.