As of 10 May 2020, 7.5 million people were taking furlough leave as part of the Government’s Coronavirus Job Retention Scheme brought in to protect jobs during the coronavirus crisis.
Subject to a gross cap of £2500 per month, this means that employees have been receiving 80% of their salary whilst not working. Some companies have chosen to top up furlough pay but this is not essential.
The Government has now confirmed that taking holiday during furlough will not break any furlough leave period or invalidate a furlough pay claim from HMRC.
One question has remained: can companies force employees to take their annual leave during a period of furlough leave?
A concern for companies has been the fact that employees have been accruing (and not necessarily taking) their annual leave. As a result, it was feared that when they eventually do return to work, there will be a lot of annual leave to take and not a lot of time in which to take it. The Government did not provide any guidance on the topic of forced leave until 13 May 2020 and even then, the answer is still not entirely transparent.
One of the first announcements made by the Government in respect of annual leave entitlement was to announce on 27th March 2020 that the Working Time (Coronavirus) (Amendment) Regulations 2020 would amend the Working Time Regulations 1998. This allows workers to carry over up to 4 weeks of annual leave into the next 2 annual leave years where it was not “reasonably practicable” to take this leave as a result of the effects of coronavirus. Not being able to take annual leave can arise from several situations, including being too sick to take it. Therefore companies, should they require their employees to remain in work to cope with demand, should have no concern about the need to ensure that all annual leave is taken this year, as companies will not be fined if their employees do not take their holiday and employees will not lose their accrued entitlement.
However, some companies would prefer their employees to take annual leave during a period of furlough for several reasons. Of particular concern is the long-term effect of employees having accumulated days of annual leave to take when the business is attempting to recover from an interruption such as this, or survive the weeks when restrictions are eventually lifted. This could leave to staff shortages or the erosion of morale if annual leave requests are refused. Conversely, some economists predict that any future recession may be short lived and as such, companies could be very busy towards the end of this year and into 2021, a situation that does not sit well with employees wishing to use a substantial amount of accrued holiday, presumably when businesses can benefit from their presence the most.
For employees who wish to take their holiday during a period of furlough, employers can agree and providing their pay is topped up to 100%, then this is lawful.
The latest government guidance is unclear on whether an employer can force employees to take annual leave, and like many of the recent changes, we are awaiting legislation to clarify the topic. Nevertheless, the guidance suggests that there is a risk that forcing an employee to take annual leave whilst furloughed could give rise to future employment claims, and we strongly urge you to take further advice before doing so. Many employees are happy to take their holiday whilst on furlough to ensure that they are receiving 100% of their pay. Communication with employees is key because if an agreement can be reached, the uncertainty of the situation can be removed, and the threat of a claim mitigated.
Please contact Katie Baker-Clifton or Stephen Nixon on 01922 720333 for further guidance and advice on the topic.