CJRS – Expanded guidance on holiday and holiday pay

On 13 May 2020, the government published more comprehensive guidance on the relationship between furlough and holiday. This clarifies some issues but still leaves ambiguity in important areas.

The main points are as follows:

• Use and accrual – workers on furlough accrue holiday as normal and can use it without breaking the furlough. The guidance states that in most cases workers on furlough will be able to use their holiday as normal.
• Bank holidays – where a worker would normally receive a bank holiday as annual leave, a bank holiday that falls during furlough can be taken and paid as annual leave, or can be deferred until after furlough has ended. Where the worker would normally be required to work the bank holiday, it may be necessary to credit them with an additional day’s leave to ensure that they receive their minimum annual entitlement.
• Compelling employees to use holiday – during furlough, employers can use their power under the Working Time Regulations (WTR) to require workers to take leave, including on bank holidays, provided proper notice is given. The guidance suggests that this power should only be used where the worker can enjoy the true purpose of holiday i.e. resting, relaxing and enjoying leisure time, and that if they are self-isolating or social distancing it would be inappropriate to require them to take holiday.

The implication that workers may not take (or be required to take) holiday during periods of social distancing appears to be an attempt to discourage employers from compelling workers to take holiday during periods when coronavirus restrictions are in place. The social reasons for this are obvious, although it puts employers in a difficult position, as requiring workers to use holiday can be an effective form of financial and workforce management during difficult times.

• Holiday pay – the new guidance confirms that holiday pay is to be calculated in accordance with the pre-existing rules in the WTR and the case law under them. This may result in the level of holiday pay being higher than the level of furlough pay. Any excess amount is for the employer to pay and may not be claimed under the CJRS. This will become more relevant from 1 August 2020 when employers will be required to contribute towards furlough pay to make it up to 80%/£2,500 per month.
• Carrying forward unused leave
  • Furloughed workers – the guidance states that furloughed workers should not need to take advantage of the emergency regulations introduced in April 2020 that permit the carrying forward of the basic four weeks’ statutory annual leave into the next two leave years where the worker has been unable to take leave because of the impact of the pandemic. The guidance suggests that there may be limited exceptions to this e.g. if the employer cannot pay holiday pay at the proper level the worker should not be required to take leave at all.
  • Non-furloughed workers – non-exhaustive examples are given of where it may not be reasonably practicable for workers to take annual leave such that they may carry it forward into the next two leave years:
    1. increased demand on the employer;
    2. inability to provide essential activities during temporary absence;
    3. the health of the worker and how soon they need to take a period of rest and relaxation;
    4. the length of time remaining in the worker’s leave year, to enable the worker to take holiday at a later date within the leave year;
    5. the extent to which the worker taking leave would impact on wider society’s response to, and recovery from, the coronavirus situation;
    6. the ability of the remainder of the available workforce to provide cover for the worker going on leave.

These are all fact-specific exceptions that will need to be assessed on a case by case basis.

As a matter of best practice, rather than actual law, the guidance states that workers who carry leave forward should use it up after they have used up their entitlement for the new leave year. This is because there are currently no rules permitting the basic four weeks’ statutory leave in future leave years to be carried forward, meaning that it would be lost if not used. However, the guidance also envisages that employers may compel workers to use carried forward leave using their power under the WTR.