Holidays and other forms of leave during Covid-19 and furlough

Furlough and holiday

The government’s most recent (17 April 2020) guidance for employees in relation to the CJRS and furlough (‘the Employee Guidance’) has clarified some of the previous uncertainty as to how furlough will interplay with holiday. The Employee Guidance now states that holiday will continue to accrue during any period of furlough, that employees can take holiday whilst on furlough (so, presumably without breaking the period of furlough) and that employers should pay an employee’s usual holiday pay during any holiday taken during furlough – so, any employer that is paying an employee just the capped, 80% / £2,500 government contribution during furlough must ‘top-up’ to 100% of the employee’s usual pay during any period of holiday. This includes bank holidays – if a bank holiday that an employee would usually take as paid leave falls during furlough, the employer should either ‘top up’ to usual holiday pay, or give a day of holiday in lieu.

Employers may want to reduce the amount of holiday that an employee accrues during furlough, so they do not return to work with a large accrued entitlement just as business may be picking up again. The usual position under the WTR is that an employer may require an employee to take annual leave at a particular time, by giving prior notice that is at least twice the length of the amount of holiday that the employer requires them to take. However, there is no guidance as to whether employers may require an employee to take holiday in this way during furlough; whilst the Employee Guidance states that employers will have the flexibility to restrict when leave can be taken if there is a business need, it does not specify that an employer may still direct when it must be taken during furlough (and the employer guidance is also silent on the matter).

So, employers should proceed with caution if wishing to direct employees to take holiday during furlough and might consider either seeking employees’ agreement, or perhaps alternating periods of furlough (of at least three weeks) with periods of mandatory holiday (given holiday must be paid in full in any event).

Cancelled holidays and requiring non-furloughed employees to take annual leave

In principle the rules permitting employers to require employees to take annual leave remain unchanged for employees who are attending work as usual or working remotely, or on reduced hours. What is more, employers should keep in mind the underlying policy reason for annual leave – to ensure that employees take adequate breaks from work, whether or not their working pattern has been temporarily adjusted. So, it may be attractive to employers to direct employees to take a portion of their accrued leave during the current period, to avoid them taking substantial, accumulating periods of leave once things return to normal.

Employers will however need to carefully consider the new rules on carry over, summarised below, and will need to take a sensitive approach with employees whose own arrangements may have been thrown into disarray with cancelled holiday plans and indefinite social-distancing rules. Consistency and fairness will be important considerations.

Holiday carry over

The Working Time (Coronavirus) (Amendment) Regulations have introduced emergency changes to the WTR, effective from 27 March 2020. These Regulations permit employees to carry over up to four weeks’ paid holiday into their next two annual leave years if “it was not reasonably practicable for a worker to take some or all of those four weeks’ statutory leave in any leave year, as a result of the effects of coronavirus”. These changes apply to any employer, irrespective of the sector in which they operate and are written very broadly.

However, the purpose of the change is important: that is, to protect employees’ annual leave entitlements where they are unable to take holiday because they are ill or self-isolating, or because of the effect on them personally, or the effect on the economy or society, of the coronavirus outbreak. Whilst this will clearly cover key workers, or those who work in a role or an industry where they are required to continue working and are unable to take leave in order to assist with the national effort, it is also potentially wide enough to cover those who have been unable to take annual leave because they have been furloughed or for other reasons related to the lockdown or social distancing restrictions.

As such, we encourage clients to take specific advice on their approach to annual leave during this period.

Employees on sick leave and furlough

The latest government guidance states that employers may furlough employees who are on long-term sick leave, but must not do so solely because they have taken sick leave or are in self isolation. However, in a slight inconsistency with the existing guidance, the Treasury Directive published on 15 April directs that for any employee who is on a pre-existing period of sick leave for which SSP is “payable or liable to be payable”, that period of SSP (or SSP eligibility) must end before the period of furlough may commence.

Any subsequent entitlement to SSP, with an employee becoming unfit for work during a period of furlough, will not interrupt the minimum three-week eligibility for any period of furlough.

In short, it is possible to claim back both under the CJRS and the SSP rebate scheme for the same employee, but not for the same period.

Sabbatical and periods of unpaid leave

Any employee who was on sabbatical or other period of unpaid leave on or before 28 February 2020 may not be furloughed until the date on which it was agreed they would return from that period of sabbatical or unpaid leave.

Further and in any event, no claim may be made in respect of any period of unpaid sabbatical or other period of unpaid leave of an employee beginning before or after 19 March 2020. This means that any employer who may have placed an employee on a period of unpaid leave in anticipation of better understanding the workings of the CJRS and furlough leave should re-visit those arrangements before submitting any claim to HMRC under the CJRS.