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HR & Development Services

Managing holidays and notice pay - Job Retention Scheme

When the Job Retention Scheme was announced, there was some confusion about how to handle annual leave in furlough but luckily we now have clarity on this, so here are some FAQs to help you manage it.

We’ve also added some brief commentary on how to handle notice pay under the furlough scheme.
Does annual leave accrue during furlough?
Yes.  New guidance has confirmed that workers placed on furlough continue to accrue statutory holiday entitlements and any additional holiday provided for under their employment contract.

What can I claim during this time?
If employees book holiday time to take off during furlough, employers can claim for 80% of the holiday pay through the grant, in the same way as normal salary.

What should I pay for any holiday period?
Holiday pay must be based on normal remuneration.   Normal remuneration is assessed over an average of 52 weeks from April 2020 (formerly 12 weeks) so annual leave during furlough must be based on normal remuneration. Although it is more expensive to have an employee on holiday rather than furlough, the advantage for the employer is that the employee’s remaining holiday entitlement between now and the end of the holiday year is reduced.

Can I require workers take annual leave?
The new government guidelines now state employers can require staff to take annual leave while they are furloughed, subject to usual statutory notice periods.   Employers may want to do this to reduce outstanding annual leave to be taken once the lockdown ends and businesses return to normal and avoid a bottleneck of leave being requested at the end of the year.

What is the statutory notice I would have to give?
Standard employment law provisions state that employers can require force workers to take holiday as long as they give twice as many days’ notice as the period of leave the worker is required to take. For example, if the employer requires the worker to take two week's annual leave at a certain time, it must give the worker at least four weeks' advance notice (or whatever is outlined in the employment contract).

How do I go about this?
Asking employees to take leave may not be a popular suggestion so employers should ensure they communicate and consult on this, treat everyone equally and fairly.   Ultimately, the employees’ agreement should therefore be sought to take annual leave while on furlough.

What about bank holidays?
For furloughed workers who would usually take bank holidays as annual leave, the guidance sets out two options. Employees can either take the bank holiday as annual leave, and be remunerated as agreed in their employment contract, or bank holiday can be deferred if this arrangement is agreed between the employer and worker.

Can staff now carry-over holiday days?
The government has passed new emergency legislation allowing workers to carry forward for two years any holiday they were unable to take this year due to the coronavirus crisis.   The rules say that it must be ‘not reasonably practicable’ for the worker to take some, or all, of the holiday to which they are entitled due to the coronavirus.

If it has not been possible for employees to take their annual leave (due to the coronavirus), employers can now allow up to four weeks (not the full 28 days) of unused leave to be carried into the next two leave years. The remaining 1.6 weeks of holiday can be carried forward by one year by agreement.

Coronavirus Job Retention Scheme - information on notice pay

How do I handle notice pay – is it at 80% or 100% pay?
There is a great deal of discussion on this point and the latest guidance does not address this . However,  there are legal considerations setting out how, in certain circumstances, it may be possible to pay notice in line with a reduced salary.  However, it appears the sensible conclusion is the employee should receive 100% of the previous pay even if they agreed to be furloughed at 80%.   Our advice would be any employer choosing to pay notice at a reduced amount does so at their own risk.
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