Holiday Accrual for Furloughed Staff
Published: 30/03/2020
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Holiday accrual for furloughed staff is a relatively unexplored topic. Many company owners and managing directors find it difficult to understand. Because of its novelty and the rapid shift towards this scheme, this is one of the grey areas that has not been fully clarified for either employers or employees. In this article, we will address that issue. We aim to explore and help you understand all aspects of staff time off while furloughed, in simple terms.
Until the COVID-19 pandemic, the existence of the furlough scheme was largely forgotten. Although not entirely new, the key principles of this approach were, for the most part, unknown to business owners since it had not been practised in decades. Furthermore, the scheme has never been implemented in such volumes throughout its history. This combination of factors has led to many questions from both employers and employees.
Paid annual leave is one of the topics causing the most confusion. Since furloughed workers are not performing their direct duties, it is assumed they should not be entitled to holiday pay. However, this is not accurate. The same confusion arises regarding bank holidays and holiday accrual. Therefore, we would like to clarify all of this in one place to alleviate any misconceptions.
In short, furloughed staff remain eligible for the minimum holiday entitlement of 5.6 weeks (28 days) per year. Moreover, employers reserve the right to require workers to use their entitlement while furloughed, but not without prior notice.
However, one factor often gets overlooked, so we want to emphasise it. If a furloughed employee takes time off while on furlough, their holiday pay will still be at the 100% rate of what they were earning prior to the furlough, even if they’re currently receiving 80% of their normal earnings.
In short, yes. Employees can take holidays without affecting their furlough status. Notice requirements regarding taking leave and denying a leave request still apply. The government recommends that companies discuss with their teams and clarify the reasons for requesting leave before doing so.
If you require a furloughed employee to take holiday, consider whether any restrictions are in place. There should be no barriers to their relaxation, rest, and enjoyment of time off. For instance, if they need to socially distance or are self-isolating, you should not enforce the time off.
A furloughed employee continues to accrue holiday entitlement as usual. The key change is that the employer can require staff to use their entitlement. However, prior notice equal to twice the length of the holiday time to be used is required.
If a furloughed employee is off work on a bank holiday that they would typically have worked, there is no change. However, the situation is different if the employee would normally have a bank holiday off. In this case, there are two options.
An employee can still request to take the bank holiday off as part of their holiday entitlement. This means they would receive the appropriate holiday pay if they have not exceeded their paid time off. However, like any other holiday request, a bank holiday off should be requested in advance.
As an employer, you also have the right to decline the request. The rules regarding holiday entitlement and rejection of holiday requests do not change if the worker is furloughed. In other words, you are still expected to provide a valid reason for denial. While this is not mandatory, it is considered best practice.
If you determine that the day isn’t classified as annual leave, the employee must still receive the day of annual leave they would have had under normal circumstances. The holiday can be rescheduled to a later date, but the worker is entitled to their full holiday allowance.
Again, this relates to the law of minimum holiday entitlement, which many employers underestimate the importance of. As we have previously discussed, insufficient time off can lead to staff burnout and reduced productivity. In furlough situations, this is likely to cause significant legal issues.
You shouldn’t automatically pay an employee on holiday the same rate they receive while furloughed, unless you’ve agreed not to reduce their pay when they are not working.
If one of your furloughed employees takes time off, you’ll need to calculate the correct holiday pay according to current guidelines – view them here. If the calculated rate exceeds the pay the employee receives while furloughed, you’ll need to cover the difference. However, since taking leave does not 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 multitude of new nuances regarding furloughed staff's holiday accrual, pay, and rules for managing it all. Although this may seem complicated, there are ways to stay organised without spending excessive time figuring it out.
One option is to use a holiday management system. We have one integrated within our project solution, and while it has extensive capabilities, here are the top features:
Online time-off bookings – easily book and approve leave from your desk or on the go using a mobile device;
Team calendars – manage projects more effectively with live views of scheduled leave;
Manage balances and carryover – review allowances and establish guidelines for unused holiday days;
Timesheet integration – automatically incorporate recorded holidays and absences with the timesheets module;
Shutdown – establish mandatory leave when the office closes, such as during Christmas.
While the government has made significant efforts to introduce a previously rare furlough scheme and adapt it for modern times, the extensive explanation turned out to be more confusing than informative. Despite a lengthy description of holiday policies, the key message remains simple: the furlough scheme does not alter the law regarding minimum holiday entitlement.
If there are still aspects of holiday accrual, time-off request denial, or general annual leave management for furloughed staff that remain unclear to you, please get in touch. We are happy to provide clarity.