May 20, 2020

Covid-19 update: Furlough and holiday pay savings

Covid-19 update

Job Retention Scheme extension

The Government has extended the Job Retention Scheme by four months to the end of October 2020. There will be no changes in the operation of the Scheme until the end of July 2020, but the Government has announced that from August 2020:

  • Furloughed employees will be able to return to work on a part-time basis
  • Employers will be required to pay a percentage towards the salaries of furloughed employees
  • The employer’s payments will substitute part of the Government's contribution under the Scheme, ensuring that furloughed employees will continue to receive 80% of their salary (up to a maximum of £2,500 a month).

Full details of how this will work will not be published until the end of May. It is hoped that employers will only be required to contribute towards pay if the employee has returned to work on a part-time basis. A more wide-ranging obligation to contribute towards the pay of furloughed staff would create financial challenges for providers, particularly in relation to shielding employees who are unable to return to work and in respect of whom providers have had to incur the cost of a recruiting and retaining a temporary replacement.

Holiday during furlough leave: potential for significant financial savings?

The Government has issued new guidance regarding employees' entitlement to holiday and holiday pay while furloughed. You will need to consider the guidance carefully as there could be significant financial savings in requiring employees to take holiday whilst furloughed. Some of the key points include:

1.  Furloughed workers continue to accrue entitlement to annual leave under the Working Time Regulations 1998.

2.  Furloughed workers can take holiday without bringing the period of furlough to an end.

3.  On the face of the guidance, you can require workers to take holiday while on furlough. However, the guidance also says ‘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’. And so unfortunately, the guidance does not provide a cast iron guarantee on this important issue. It is not clear whether, in the current climate, a Tribunal would accept that employees are able to rest and enjoy a period of relaxation and leisure if they are forced to take ‘holiday’ by their employer. Careful consideration should be given to those employees who are shielding or living with someone who is shielding.

4.  You must comply with regulation 15 of the Working Time Regulations 1998 if requiring employees to take holiday. This means giving the employee notice that is double the length of the holiday you are asking them to take, e.g. 10 days’ notice to take 5 days’ holiday.

5.  The guidance confirms that holiday pay during furlough must be ‘normal remuneration’. If this is higher that the furlough rate of pay, you will have to make up the difference. However, you can claim up to 80% (or £2,500 per month) under the CJRS, which could represent a considerable financial saving compared to the employee taking their holiday after furlough leave, where you will bear the full cost.

6.  Unused holiday can be carried forward into the following two leave years, 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.

7.  The guidance notes that furloughed workers will be unlikely to need to carry holiday forward as they will be able to take it during the furlough period, so long as you pay the correct rate of holiday pay (i.e. 100% of pay). If you cannot afford to make up the difference between holiday pay and furloughed pay, this will likely prevent the worker from taking leave. This could have particular significance if the furlough rate of pay is tapered from August, which is a possibility. At present you would have to top up holiday pay by 20% (or more for higher earners). From August, if the Government were only to pay 60% of wages, you would have to top up by 40% (or more for higher earners). In other words, requiring employees to take holiday before August could save you a considerable sum of money.

SSP Rebate Scheme goes live on 26 May 2020

The Government has announced that employers will be able to make a claim under the SSP Rebate Scheme from 26 May 2020. If you have less than 250 staff, you are eligible to claim back two weeks' SSP per employee who was unable to work because they:

  • had coronavirus symptoms or were self-isolating because someone they lived with had symptoms, where the period of absence started on or after 13 March 2020; or
  • were shielding and have a letter from the NHS or a GP telling to stay at home for at least 12 weeks, where the period of absence started on or after 16 April 2020

The current guidance is available here.

Share on: