Holiday pay during furlough raises its head as we enter another lockdown.

We all saw it coming – on 31 October 2020, Boris Johnson announced a second nationwide lockdown. This means the furlough scheme will be extended by at least one more month. These constant changes can be difficult to keep up with. This article aims to ensure that employers are following the letter of the ‘new law’ on holiday entitlement and holiday pay during furlough .
With the extension of furlough it’s mandatory to pay the correct holiday pay. But employers can protect themselves and receive the assistance that they are entitled to.

Holiday pay during furlough – guidance for employers

Employers with contractual holiday entitlements that are more generous than statutory amounts may, by agreement with employees, reduce holiday entitlements during furlough. But they mustn’t take the entitlement below the statutory level and and should do this with legal advice.
Employers must ensure they are still giving their employees contractual holiday entitlement and holiday pay during furlough. For example, if an employee works full time they are entitled to their statutory 5.6 weeks paid holiday during furlough.
Holiday entitlements are pro-rated for part-time workers, of course. Many employers are agreeing with employees to move them onto part-time contracts, anticipating that less work will be available after furlough.
The employer must pay the normal rate of holiday pay even if the employee’s salary has been reduced during furlough. The employer can still claim the 80% grant from the Government. The employer must top up the remainder.
Employers can force employees to take their holiday during furlough. This will to avoid them building up holiday and taking it en masse once furlough ends. Also, employers are allowed to cancel a worker’s holiday as long as they give enough notice. A good rule of thumb is to give notice that is twice the duration of the holiday period.
At this uncertain time, employers should consider if the employees’ holiday will be interrupted due to isolation or being unwell. The purpose of taking holiday is to relax and enjoy leisure time. Caselaw says that the employee who falls ill on holiday is allowed to convert it to sick leave.

Holiday pay during furlough – guidance for employees

Full-time workers are entitled to 5.6 weeks of holiday (the contract may give more).
In normal times, it’s “use it or lose it”, that is unused holiday entitlement expires at the end of the holiday year. The emergency Working Time (Coronavirus) (Amendment) Regulations 2020 lets employees and agency workers carry holiday over to the next holiday year. And to the one after that, if it isn’t possible to take holiday. An example of this, could be where employers can’t afford to let employees take their holiday in the current holiday year.
If an employee is furloughed they are entitled to the amount of holiday in their contract at the same rate of pay unless the parties changed it by agreement (see above). It is important that to check the monthly salary to ensure the pay is correct.
Furloughed agency workers are also protected by the new law and will continue to accrue their holiday as set out in their contract.
It is important for employers to check that they have given the right holiday entitlement and holiday pay during furlough. Employees can bring claims up to three months after holiday goes unpaid. Since employees may now claim to be allowed to take their 2020 holiday up to (and including 2022), we are likely to see furlough-related holiday claims well into 2023.
If you have any questions arising from this article or need some assistance with holiday pay during furlough, please contact us on 0121 631 3000.
By Jaswinder Kaur
Image used under CC courtesy of Wall Boat