Coronavirus Job Retention Scheme – Holiday Pay

The Government have confirmed that the grant under the Coronavirus Job Retention Scheme (“CJRS”) can still be claimed for holiday taken during period of furlough.

If an employee on furlough takes annual leave, an employer must calculate and pay the correct holiday pay in accordance with the contract.  Where this contract rate is more than what the employee is receiving on furlough then the employer must pay the difference.

The Government has confirmed that taking holiday does not break the furlough period and the employer can continue to claim the grant from the government under the CJRS for the period of holiday.  The cost to the employer is therefore only the top up from the claim under CJRS and the normal pay rate for holiday.

The employer is able to insist that holiday is taken provided they give the correct notice which is twice the amount of holiday to be taken.  For example to insist one week of holiday is taken, two weeks’ notice must be given.  Due consideration should be given to the employee to consider whether any social distancing or self-isolation restrictions the employee is under would prevent the employee from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday.

For bank holidays, where a bank holiday falls within a period of furlough and the employee would have usually worked the bank holiday, their furlough will be unaffected by the bank holiday.

However, if the employee would usually have had the bank holiday as annual leave, there are two options on which the employer and employee should agree:
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• The bank holiday can be taken as annual leave.  The employee should be paid the correct rate of holiday pay in line with their contract and the employer can claim back the grant under the CJRS; or
• The bank holiday can be deferred to a later date.  The employee should still receive their full holiday entitlement.

 
We recommend that employers consider annual leave carefully for any employees that are on furlough before they return.  If holiday is not considered then an employee could be away from work for several months on furlough, and then return with their full holiday entitlement to be taken when the business is back up and running.
 
There have also been some changes to the carry forward of holidays into future years that may impact on this issue, and further details relating to these changes can be found here.