Holiday Accrual for Furloughed Staff
Published: 01/04/2020
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Holiday accrual for furloughed staff is a rather unexplored topic. Most company owners and managing directors struggle to get their heads around it. Due to novelty and swift mass shift towards the scheme, this is one of the grey areas that has not been fully explained to either employers or employees. In this article, we will be changing that. We seek to explore and help you understand all aspects of staff time off while furloughed, in simple terms.
Up until the COVID-19 pandemic, the very existence of the furlough scheme was long forgotten. Although barely a novelty, key principles of this approach, on a big part, were unknown to business owners as it has not been practised in decades. Also, the scheme has never once been implemented in such volumes throughout its history. A combination of these factors led to many questions both employers and employees have.
Paid annual leave is one of the topics causing the most confusion. Since furloughed workers are not carrying out their direct duties, it is assumed they should not be entitled to holiday pay. However, this is not true. The same confusion arises on the topic of bank holidays and holiday accrual arises. So, we would like to debunk all of it in one place to alleviate any misconceptions.
To put it shortly, the furloughed staff is still eligible for minimum holiday entitlement, which is 5.6 weeks (28 days) a year. In fact, an employer also reserves the full right of requiring the workers to use their entitlement while they’re furloughed. But not without a prior warning.
However, one factor often gets overlooked thus we want to emphasize it. If a furloughed employee takes time off while furlough, their holiday pay will still be the 100% rate of what they were earning prior to furlough. Even if they’re currently receiving 80% of their normal earnings.
Short answer - yes. Employees are able to take holidays without it disrupting their furlough status. Notice requirements with regard to taking leave and refusing a request for leave still apply. The government suggests that companies should talk to their teams and explain reasons for wanting them to take leave before asking them to do so.
If you require a furloughed employee to take holiday, you should first consider whether there are any restrictions in place. There should be no preventions to them from relaxing, resting and enjoying the time off. For instance, if they need to socially distance themselves or are self-isolating you should not enforce the time off.
A furloughed employee continues accruing holiday entitlement as normal. The key change is that the employer can require the staff to use their entitlement. Although a prior notice equal to double the length of the holiday time they want to be used is required.
If a furloughed employee is off work over a bank holiday day that they would have typically worked, there is no change. However, things are different if the employee would have usually had a bank holiday off work. In this case, there are two options.
An employee can still request to have the bank holiday day off as part of their holiday entitlement. This means that they would be paid the correct holiday pay if they have not exceeded their paid time off. However, like any other holiday request, a bank holiday day off should be requested in advance.
As an employer, you also reserve the right to decline the request. The rules regarding holiday entitlement and holiday request rejection don’t change if the worker is furloughed. In other words, you would still be expected to provide a good reason for denial. This is not necessary but is known to be the best practice.
If you decide that the day isn’t treated as annual leave, the employee must still get the day of annual leave they would have had in normal circumstances. The holiday can be pushed back to a later date, but the worker is entitled to their full holiday allowance.
Again, this goes back to the law of minimum holiday entitlement many employers underestimate the importance of. As we have previously discussed, not having sufficient time off can lead staff to burnout and lesser productivity. In furlough settings, this is likely to cause big legal issues.
You shouldn’t automatically pay an employee on holiday the rate they’re receiving whilst they are furloughed. Unless you’ve agreed to not reduce the employee’s pay when they are not working.
If one of your furloughed employees takes time off, then you’ll need to work out the correct holiday pay in accordance with current guidelines – view them here. Where the calculated rate is above the pay the employee is receiving while furloughed, you’ll need to make up the difference. However, because taking leave doesn’t interrupt the furlough, you can still claim the 80% grant to cover most of the holiday pay.
As you can see, the furlough scheme has introduced a plethora of new nuances when it comes to furloughed staff holiday accrual, pay and rules for handling it all. While this certainly looks complicated, there are ways of staying on top of things without sacrificing time to figure it out.
One of them would be employing a holiday management system. We have one integrated within our project solution, and while it has wide capacities, here are the top features:
Online time-off bookings – book and approve leave from your desk or on the move from a mobile device
Team calendars – manage projects more effectively with live views of booked leave
Manage balances and carryover – check allowances and set rules for carryover holiday days
Timesheet integration – automatically integrate booked holidays and absences with the timesheets module
Shutdown – set mandatory leave when the office shuts down, for instance over Christmas.
While the government has gone to great lengths to introduce a previously rare furlough scheme and adapt it to modern days the extensive explanation proved to be more confusing than informative. Despite a wordy detailing of holiday policies, the key message is simple. The furlough scheme does not change the law regarding minimum holiday entitlement.
If there are still aspects of holiday accrual, time-off request rejection or general annual leave management for furloughed staff that remain unclear to you - get in touch. We are happy to add clarity.