Furlough – a term that many people would have been unfamiliar with at the beginning of 2020. But which is now commonly used across all sectors of the UK.
The governments Job Retention Scheme enables employers to ‘furlough’ employees if their business has been affected by the Coronavirus pandemic. This essentially means that the government pay the salaries of those who have been furloughed, in an attempt to prevent redundancies whilst business earnings are significantly limited by the lockdown. The scheme covers up to 80% of the individual’s salary, up to a cap of £2,500 a month.
Currently, if your employees are furloughed, they are not able to carry out any work for you. But more flexibility will be introduced from July whereby furloughed workers will be allowed to return to work on a part time basis. With employers being asked to cover some of the salaries of furloughed staff.
One area employers may be considering is the impact on furloughed employees leave and furloughed employees holiday pay. Employees continue to have certain rights when it comes to holiday whilst furloughed and employers have a responsibility to ensure that these rights are met.
Is holiday accrued over the furlough period?
Yes. According to the gov.uk website, employees who have been placed on the Job Retention Scheme will continue to accrue statutory holiday entitlement.
Other than those who are self-employed, most employed workers are entitled to 5.6 weeks of paid leave a year. This is a legal requirement.
Employers may choose to provide additional holiday contractually on top of this. Furloughed workers will also continue to accrue any additional holiday provided under their contract.
For full advice and a guide on how to calculate holiday entitlement refer to the gov.uk website.
Can employees take holiday whilst furloughed?
Furloughed employees can take holiday without disrupting furlough.
If as an employer, you require or want employees to take holiday whilst they are furloughed then it is best practice to explain to employees why you want them to take holiday. As well as considering any restrictions which may be in place which prevent the individual from getting adequate rest relaxation and leisure time from the holiday (e.g self-isolation, social distancing etc)
What are employers’ responsibilities when it comes to holiday pay during furlough?
If an employee on furlough wants to take holiday then the government state that you must pay the correct holiday pay in accordance with current legislation.
If the holiday pay entitlement is a higher rate than the 80% salary being covered by the furlough scheme, then as an employer, you must cover the difference. But the 80% grant can still be claimed from the government as taking holiday does not break the furlough. So, in essence, the government grant will likely cover a significant proportion of the holiday pay.
If as a business you are not able to afford to fund the difference (due to the coronavirus impact on your business for example), then it is considered that this would not make it reasonably practical for the employee to take their annual leave. This would then enable the employee to carry their annual leave over in the next 2 years.
But if this situation does arise, as an employer you must ensure that employees are still given the opportunity to take their leave at the correct pay before any leave carried over is lost.
What if employees do not use up their annual leave due to Coronavirus?
Of course, taking holiday during the Coronavirus pandemic may not be at the top of the agenda for many employees given the restrictions being imposed on everyday life by lockdown. Something which could leave employers and employees in a difficult position.
Employers have an obligation to ensure that employees take their statutory holiday entitlement in one year. Whilst employees can find that if they do not use their holiday, then they lose it due to the fact that most holiday entitlement cannot be transferred across years.
Due to the exceptional circumstances presented by the Coronavirus, the government have relaxed rules around carrying over annual leave, allowing employees who do not use up their statutory holiday entitlement to carry this forward into the next 2 years.
The aim is to give employees reassurance that they won’t lose their holiday if they are unable to take it due to Covid-19. And to also give flexibility to businesses at a difficult time.
It is important to be aware of your responsibilities as an employer to both those employees who have been furloughed as well as those working during the pandemic. Keeping up to date with government guidance relating to Coronavirus will be vital as well as ensuring you work within any relevant legal requirements. Don’t neglect your insurance needs at this time either – Anthony Jones work across the full range of business insurance products so if you have any questions about a current policy or future requirements don’t hesitate to get in touch with us.