New Guidance on Holiday Entitlement and Pay during COVID-19
The Government finally provided its separate new guidance document on Holiday entitlement and pay during COVID -19, it would answer the numerous questions on this issue which have been circulating since the announcement of the Job Retention Scheme in March.
In the usual course, workers take their holiday throughout the leave year and is spread across the year accordingly. During lock down, individuals cannot in practical terms go away on holiday, which causes accrual. As a partial answer to this issue, the government introduced a temporary new law amending the Working Time Regulations to allow workers to carry forward up to four weeks’ paid holiday over a two-year period, if they cannot take that holiday due to Coronavirus.
To date it has not been clear how the usual rules on holiday applied to those on furlough leave. With an estimated 7.5 million workers now covered by the Scheme, all accruing leave. The guidance does provide some clarity in relation to the interaction of annual leave with furlough.
Key points below:
• Accrual: Furloughed workers will continue to accrue both statutory holiday entitlements (5.6 weeks per year), and any additional holiday provided for under their contracts.
• Taking holiday: Workers on furlough can take holiday without disrupting their furlough. The guidance also confirms that employers can require furloughed workers to take holiday at a specified time and can also cancel a worker’s holiday, provided in each case that they give the requisite notice to the worker in accordance with the WTR.
“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”.
Employers should when requiring individuals to take holiday consider whether anything in their particular circumstances during this pandemic might mean they are prevented from resting, relaxing and enjoying leisure time. A blanket approach requiring all furloughed employees to take a certain period of their accrued leave should generate grievances.
• Holiday pay: As expected, the guidance confirms that holiday pay for furloughed workers should be calculated in line with current legislation and based on usual earnings i.e. the worker must receive 100% of their usual pay. Given that only up to 80% will be covered by the Scheme, the employer will be obliged to top up the rest.
• Bank holidays: The guidance confirms that if a furloughed worker would usually have had the bank holiday as annual leave, there are 2 options.
- If the employer and the worker agree that the bank holiday can be taken as annual leave while on furlough, the employer must pay the correct holiday pay for the worker; or
- If the employer and the worker agree that the bank holiday will not be taken as annual leave at that time, the worker must still receive the day of annual leave that they would have received. This holiday can be deferred until a later date, but the worker should still receive their full holiday entitlement.
• Carry forward: The guidance provides more information around when it will not be reasonably practicable for workers to take holiday due to Coronavirus in accordance with the new law. An employer should consider various factors, such as:
- whether a business has faced a significant increase in demand due to Coronavirus that reasonably requires the worker to continue to be at work and cannot be met through alternative measures.
- the extent to which a business’ workforce is disrupted by the virus and the options available to the business to provide temporary cover for essential activities.
- the health of the employee and how soon they need to take a period of rest and relaxation.
- whether there is time left in the leave year to enable employees to take holiday at a later date within that same year.
- the extent to which taking leave would impact on wider society’s response to, and recovery from, the Coronavirus situation.
- the ability of the remainder of the workforce to provide cover for the worker going on leave.
Employers should do everything reasonably practicable to ensure that the employee is able to take as much of their leave as possible in the year to which it relates, and where leave is carried forward, it is best practice to give workers the opportunity to take that holiday at the earliest practicable opportunity.
Importantly, the guidance also confirms that if, due to the impact of Coronavirus on operations, the employer is unable to fund the difference between furlough pay and the 100% of pay a worker is entitled to receive for holiday days, 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. Carried leave is still subject to the usual rules around payment in lieu. An employer must facilitate the worker taking their annual leave and cannot replace it with a financial payment, except on termination.
