New guidance on holiday entitlement and pay during coronavirus
On 13 May 2020, the government issued new guidance on holiday entitlement and pay during coronavirus. It is designed to help employers understand their legal obligations for workers who have been placed on furlough as part of the government’s Coronavirus Job Retention Scheme (“CJRS”). The guidance will be welcome to those employers concerned about the build-up of significant levels of holiday amongst furloughed staff.
We set out below a summary of the key points. However, employers should bear in mind that the new guidance is exactly that – guidance. It is non-statutory and does not over-ride normal employment law rules relating to holiday (many of which are complicated). The guidance does, however, explain the factors that employers should be considering in the current climate.
Please get in touch if you need help with any of the issues set out below.
Key points in the new guidance
1. Workers who have been placed on furlough continue to accrue statutory holiday entitlements, and any additional holiday provided for under their employment contract.
2. Workers on furlough can take holiday without disrupting their furlough. Employers can require a worker to take holiday during furlough and can refuse a worker’s request to take holiday during furlough. The usual notice requirements continue to apply.
3. Interestingly, however, the guidance states: “If an employer requires a worker to take holiday while on furlough, 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 guidance, therefore, does not give a clear view on whether holiday taken during furlough meets the definition of annual leave set down in ECJ case law i.e. that such leave must enable the worker to rest and to enjoy a period of relaxation and leisure. This highlights a significant grey area – if an employer insists that a worker takes holiday during furlough, a worker may well complain that they are not able to properly rest and relax if they cannot go anywhere and/or visit friends or family. We would urge employers to take advice on this if it becomes an issue.
4. Where a worker would usually have taken bank holidays as annual holiday, the guidance sets out two options: either it is agreed between the employer and worker that the bank holiday is taken (and paid for – see further below) as annual holiday, or the bank holiday is deferred by agreement until a later date (but the worker must still receive their full holiday entitlement).
Unhelpfully, this part of the guidance presupposes that the employer and worker will have proactively agreed how bank holidays will be treated and is silent on what happens if (which is likely) no express agreement has been reached.
5. In relation to holiday pay, the guidance confirms that a furloughed worker must be paid the correct holiday pay in accordance with current legislation, which is based on normal remuneration. Where this is higher than the furlough pay rate, the employer must pay the difference but will still be able to claim up to 80% (or £2,500 per month) under the CJRS.
6. We published this earlier update when the government passed emergency legislation enabling workers to carry holiday forward (into the following two holiday years) where the impact of coronavirus means that it is not “reasonably practicable” to take it in the holiday year to which it relates.
The new guidance sets out the factors that employers should consider when deciding whether it is not “reasonably practicable” for a worker to take holiday as a result of coronavirus (so that they can then carry it forward). These are:
– 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 cannot be met through alternative practical measures;
– the extent to which the business’ workforce is disrupted by the coronavirus and the practical options available to the business to provide the temporary cover of essential activities;
– the health of the worker and how soon they need to take a period of rest and relaxation;
– the length of time remaining in the worker’s holiday year, to enable the worker to take holiday at a later date within the holiday year;
– the extent to which the worker taking holiday would impact on wider society’s response to, and recovery from, the coronavirus situation;
– the ability of the remainder of the available workforce to provide cover for the worker going on holiday.
7. The guidance goes on to explain that furloughed workers are unlikely to need to carry forward statutory annual holiday as they are able to take holiday during their furlough period paid at the correct rate (although note the grey area here highlighted above).
8. Importantly, the guidance states that “If due to the impact of coronavirus on operations, the employer is unable to fund the difference, it is likely that this would make it not reasonably practicable for the worker to take their leave, enabling the worker to carry their annual leave forwards.”
9. In relation to carry forward, and to ensure workers do not lose any holiday entitlement, the guidance states that it is best practice for employers to inform workers of both the need to carry forward and how much holiday will be carried.
10. Finally, the guidance sets out specific points relating to agency workers’ holiday entitlement.
If you need help with any of these issues or any other aspects of employment law, please do get in touch.Back to Our Thinking →