In the run up to Christmas, and what is for many businesses the end of their holiday year on 31 December, many employers would in normal circumstances now turn their attentions to the amount of accrued holiday which employees have not yet taken.  In many instances this might result in staff being encouraged or required to take the time off over the Christmas period.

This year, however, many employees have not taken as much time off as they normally would, given the limits on travel occasioned by lockdown.  Additionally, many employees will be on furlough and therefore will not need to take holiday at all, leading to an accrual of significant amounts of holiday.  In many cases employers will be confused about what the holiday rules are in relation to furloughed employees (and those who have been furloughed until recently).

Here are some frequently asked questions:

Does an employee accrue holiday whilst on furlough?

An employee accrues holiday in the normal way whilst on furlough.

In a typical furlough scenario, an employee’s contract is amended so that they are not required to perform work for their employer for a period of time and their salary is reduced by 20%, subject to a cap of £2,500 per month (unless the employer is topping up the Government’s grant).  This variation does not change other terms of the employment contract such as the right to holiday. Therefore, both an employee’s statutory and any contractual holiday will continue to accrue as normal whilst he or she is on furlough.

Can we require an employee who is on furlough to take holiday they have accrued, whilst they are on furlough?

Employees and workers who are on furlough can take holiday without disrupting their furlough.

An employer is able to require an employee to take holiday in the normal way, provided the employee is given sufficient notice. The normal statutory rule is that the employer must give notice which is twice the amount of days that it wants an employee to take. For example, if an employer wishes an employee to take two days of annual leave whilst on furlough, it should give the employee at least four days’ advance notice.

However, it should be noted that the underlying purpose of the Working Time Regulations, which guarantee a minimum holiday entitlement to all workers, is to ensure that employees are given sufficient rest and time off in order to avert stress. This may not be achievable if, for example, the employee is under restrictions or is required to socially distance or self-isolate. So if following the end of the current lockdown period an employee is under Tier 3 restrictions then he or she may not be able to adequately rest and relax during any required holiday, in which case it may be arguable that it is not appropriate for his or her employer to require holiday to be taken at that time.

What is the holiday pay rate for an employee who is on furlough?

If an employer requires an employee to take holiday whilst on furlough, or if an employee has requested to take holiday whilst on furlough, the rate of pay is not the same as furlough pay (typically 80% of normal salary or £2,500 per month).

The rate of pay has to be calculated by the employer in accordance with the statutory calculation under the Employment Rights Act 1996, which reflects the principle that a worker should not be financially worse off because of any holiday taken. An employee is entitled to a “week’s pay” for every week (normally five working days) of holiday calculated by reference to the employee’s average weekly rate of pay over the last 52 weeks (normally running Sunday to Sunday). Even if the employee has been on furlough, the average weekly pay is likely to be more than furlough pay.

When calculating the 52 weeks’ pay, employers should disregard the time during which the employee was on annual leave.

What about carrying over unused holiday into the next year?

This issue arises for both furloughed and non-furloughed employees.  There is a distinction between three types of holiday entitlement: holiday required under European law (20 days), additional holiday required under UK law (a further eight days) and any further holiday agreed under the employee’s contract. 

Generally speaking, the 20 days European holiday is “use it or lose it” and must be taken in the year in which it arises (subject to exceptions for maternity and long-term illnesses).  However, during the early days of the pandemic the UK government amended the Working Time Regulations so that front-line and other important employees (who were unable to take holiday because of Covid-related demands upon them) can carry forward holiday entitlement if it is “not reasonably practicable for a worker to take some or all of the leave” to which he or she is entitled “as a result of the effects of coronavirus”. This is a relatively narrow exception and does not give all employees a right to carry over this type of holiday just because it is their preference or because they have not been able to travel.

Contact us

If you have any questions about these issues in relation to your own organisation, please contact a member of the team or speak to your usual Fox Williams contact.


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