Furlough has now become embedded in the UK business dictionary as part of our normal vocabulary.  Since the Government announcement that furlough would be introduced the rules around it have started to become clearer but there is one persistent area that remains largely unanswered and open to wide-ranging interpretation – holidays.

For now, the UK Government has been fairly quiet on the matter and we are left in the position of having to interpret other legislation to determine what is and what is not possible.

Taking holidays whilst furloughed

We can say with some certainty that being on holidays does not break a period of furlough so we can state that employees can be asked or ask to take holidays whilst furloughed from work.  If an employer wishes to ask employees to take a period of leave (use up their holiday allowance) then they must make this request in a timeframe that is equal to twice as long as the period of leave.  So if you want to have a close down for a week and ask the team to take a weeks holiday then you need to give two weeks notice.

Likewise, an employee can ask for a holiday (not sure why they would) and follow normal processes.

Bear in mind equal treatment, so if you have 50% of the team furloughed and 50% working from home, asking furloughed staff to take leave (use up their balance) and not asking the same of the home working team could lead to claims of unfairness as you are singling out a group of employees for different treatment.

Getting paid for holidays whilst furloughed

Now we hit a sticky spot and the Government has not explicitly stated what happens in this scenario.  ACAS has suggested that an employee on holiday should be paid 100% of their normal wages but there is no official guidance, so if you have furloughed at 80% this could continue but you may find that you are required to pay the 20% at a later date to make up for missed wages.

  • Option 1 – To be safe, best practice would be to pay holiday days enforced or requested at 100% of normal wages subject to organisational finances if you have furloughed at 80% of wages
  • Option 2 – If you have furloughed at 80% of normal wages, make holiday pay payments at 80% and make an allowance for the 20% missing on holiday days and retain this in case you need to pay it out in the future

In the case of option 2, this may well be decided much further down the road through tribunal claims clarifying legislation and the effect of furlough.

Treatment of bank holidays

This will depend on your contract clauses, most state 20 plus 8 bank holidays – in which case, for the weekend just passed, the two bank holiday days would be taken from the employees holiday balance.

Where holidays are written in the contract as 28 days including the bank holidays, then no holidays would be deducted for the bank holiday if they were normal working days, unless the employer requested the employee to take those days as leave or the employee requested those days as holiday.

Carrying over unused leave

In recognition of the impact of furlough on leave balances, the Working Time Regulations are being amended to allow for up to 4 weeks of leave to be carried over for two years.  Whilst this is a blessing this is also a headache as most employers will not be able to accommodate this much additional leave in a two-year window without having an impact on performance.

To help deal with this it may be worth considering the options below:

  1. Actively plan a proportion of holidays during the remainder of 2020 and 2021 by looking at the team balances outstanding and mandating periods of holiday for members of the team over the next 8 to 24 months.  The advantage is that holidays are being planned around when you are likely to be able to accommodate them and the availability of other staff as opposed to having to deal with conflicting requests from the team
  2. Activate shorter working hours with the balance being made up of holidays, so in this scenario when furlough comes to an end, but you are not up to full speed you may ask employees to work four days per week for a month (for example), with the 5th day being a holiday day, this could remove 5 days of entitlement depending on the month
  3. At the end of furlough if not all staff are required at the same time, then you could request that some of the team remain on holiday for a number of days afterwards this would help people phase back into work whilst accomodating short term workloads – this is subject to the point above regarding equal treatment
  4. If you have furloughed the team at 80% of normal wages, then suggest that employees may like to use holidays to make up the balance by taking take three or four days per month – accepting these days could be paid at 100% or 80% subject to further clarification

Please note

  • Under UK law you cannot buy back statutory holidays (5.6 weeks) from employees so you cannot force the team to sell you back unused days
  • Where an employee requests to sell you holiday days – officially this is still a no-no
  • An employer does not have to carry over unused days that relate to additional holiday over and above the 28 normal days (unless it says in the employees contract), so if your contract offers more than 28 days, you could mandate that employees use their statutory leave entitlement first during the remainder of 2020, then you have a choice of whether to carry over the additional days, cancel them or buy them back (depending on how its worded in your contract).
  • If you do offer more than 28 days holiday per annum and it is non-contractual you could cancel them for 2020
  • If you do offer more than 28 days holiday per annum you could offer to buy back the additional days (contractual or otherwise)

At the end of the day, you cannot avoid your responsibilities with regard to statutory holidays but you can plan for potential solutions to the problems that are likely to arise in the short term.