May 14, 2020

The furlough scheme and paid leave – 8 things employers need to know

Employers will need to consider the guidance carefully as it could have significant financial savings to require employees to take holiday whilst furloughed. Our team of employment lawyers have put together these points for you to consider:

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, employers 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 guarantees on this important issue. For example, careful consideration should be given to those employees who are shielding or living with someone who is shielding. 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.

4. Employers must comply with regulation 15 of the Working Time Regulations 1998 when requiring Employees to take holiday. This means giving the employees notice which is double the length of the holiday they are asking the employee to take. For example, an Employer must give at least 10 days notice in requiring employees to take 5 days holiday.

5. In relation to the question of whether furloughed workers can carry forward statutory annual leave, the guidance notes that they will be unlikely to need to carry holiday forward as they will be able to take it during the furlough period, so long as the employer pays the correct rate of holiday pay. If employers 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 significant if the furlough rate of pay covered by the Government is tapered from August, which is a possibility. At present an employer will 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, then the Employer would have to top up by 40%. In other words, requiring employees to take holiday before August could save employers a considerable amount of money.

6. The guidance confirms that holiday pay during furlough must be ‘normal remuneration’. If this is higher that the furlough rate of pay, the employer will have to make up the difference (although they are still able to claim up to 80% (or £2,500 per month) under the CJRS.

7. 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.

8. Employers should do everything reasonably practicable to ensure that the worker is able to take as much of his or her leave as possible.

There is no guidance on how much holiday employers can require employees to take. However, we would advise employers to apply any requirement consistently and act cautiously in requiring employees to take most, or all of, their holiday. In the worst case scenario, this could be grounds for claiming constructive unfair dismissal and it could also give rise to an overpayment, if employees resign or are made redundant midway through a holiday year.

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