Furlough and annual leave | All you need to know

The question around furlough and annual leave has been a common one since the introduction of furlough in March 2020. Does an employee on furlough accrue annual leave whilst on furlough? When should they take leave? How should they request it? Can the company require employees to take their annual leave? 

As furlough is a relatively new concept in employment law in the UK, it took some time initially for the guidance around furlough and annual leave entitlement to be published to provide clarification for employers and employment law solicitors. The Holiday entitlement and pay during coronavirus (COVID-19) guidance was published in May 2020, however as an employer, you may be new to the furlough scheme, as this new extended furlough scheme does not require you to have used the scheme in March through October. 

With the furlough scheme now having been extended into 2021, we’ve put together a guide for everything you need to know about your rights as an employer and your employees’ rights, too, whether your business is new to using the furlough scheme, or whether you’ve been utilising furlough since its introduction in March.

Annual leave and furlough – the key points for employers to be aware of

• Employees continue to accrue holiday whilst they are furloughed at the same rate as they normally would when at work and they can use this holiday whilst on furlough without it interrupting a period of furlough. Therefore, employers can continue to claim under the furlough scheme for employees using annual leave.
• Employers have the right to require their furloughed employees to take annual leave. It is best to put this requirement in writing (an email is fine) and give at least twice as much notice as the required leave (for example, if an employer wanted an employee to take 5 days’ holiday, they need to provide the employee with 10 days’ notice).
• If an employee takes annual leave whilst they are on furlough and end up being sick/ill on that day, they will regain the number of days for which they were sick and be entitled to rebook these.
• When an employee takes annual leave whilst furloughed, employers must top up to 100% of the employee’s pre-furlough pay for the holiday days taken if the employee is only receiving 80% of their usual salary/earnings.
• If your employees do not work regular hours or do not earn a regular rate for the hours they work, their holiday pay entitlement should be calculated based on the average weekly earnings in the year prior to the relevant holiday they’re looking to take – employees should not receive less pay than they usually would because they are using their holiday entitlement.

It is also important to note that new government guidance has been introduced to help support employers and their teams to manage the disruptions cause by COVID-19 when it comes to annual leave. 

Previously, employees have had to take at least four weeks of their 5.6 statutory weeks in each year without being able to carry over the remaining time (other than in very limited circumstances). The emergency legislation brought in by the government has allowed more than 1.6 weeks of holiday to be carried over if there is an agreement between the employer and the employee in writing. This legislation has allowed for more than 1.6 weeks annual leave to be carried over to the following two holiday years. 

This is if it has not been practical for an employee to take at least four weeks’ annual leave ‘due to the effects of the Coronavirus’. The legislation is not restrictive, and there are several reasons why holiday may not be taken within the holiday year which will allow employees to carry that time over.

Holiday pay and redundancy

As an employer, it’s worth bearing in mind that, in the unfortunate circumstance that you should have to make redundancies, your employees will be entitled to be paid for accrued and outstanding annual leave if you need to make them redundant. Putting a requirement in place for your employees to take annual leave days whilst on furlough will reduce the amount you have to pay if there are redundancies that must be made. 

Legal issues and questions around holidays can be complicated and the furlough scheme has added even more variables into the mix. This is particularly true when it comes to annual leave entitlement where employees do not work regular hours.  

Luckily, our expert team of employment law solicitors are happy to answer any questions you might have from an employer or business owner point of view.