HMRC has just released the hotly awaited update on holidays and annual leave for furloughed employees! Great news.
Holiday entitlement is to be paid at 100% to all furloughed employees. Employees will also continue to accrue holiday entitlement while furloughed. In practice, this means that an employer will need to top up the furlough payment for all holidays taken during furlough.
Furlough and annual leave can run simultaneously; therefore, an employee can be furloughed at the same time as being on annual leave.
Can an employer force employees to take annual leave?
There are competing views on this question, some experts saying yes but others no. In respect of YES, the Working Time Regulations 1996 are being cited as giving the right to do so long as double the amount of notice is given in advance of the request. For example, if an employer wants an employee to take one-week of annual leave, they would need to give two weeks’ notice of this.
In respect of NO, it is suggested that the purpose of annual leave is to take a period of rest and relaxation away from work. Barrister, Adam Willoughby writing for ThriveLaw compares furlough to sick leave, arguing that furlough is tantamount to being at home sick (see Stringer, citation below) in so far as an employee is unable to leave the house or enjoy the freedoms associated with annual leave. I find this argument very compelling and am inclined to agree with him.
Perhaps the key to this question is the fact that employers cannot force employees to take annual leave while they are on sick leave? Notwithstanding the fact that employees can take annual leave while on sick leave their employer cannot force them to do so because the purpose of sickness absence is to recover from sickness. In addition, the employee must be given an opportunity to take the accrued annual leave upon their return to work.
Can annual leave be carried forward as a result of coronavirus?
Yes. Up to 4 weeks annual leave can be carried forward up to 2 years, meaning that employers and employees will benefit from not having to cram in annual leave.
Why might a business want furloughed employees to use their holiday entitlement?
Some employers may wish to ensure that staff are not all trying to take holidays at the same time when the business reopens. It could be argued that asking employees to take holidays now will lessen the impact going forward. However, the government has made provision for annual leave entitlement to be carried forward (see above) thereby lessening the impact of this, especially given that employers are not obliged to approve every single holiday request without question.
The downside to requesting employees to take annual leave is that any furlough payment will need to be topped up to 100%. For businesses facing an uncertain financial future, it may be more prudent to keep cash reserves and do a more thorough job of managing holiday requests when the employees return to work.
For more detail on Furlough, please see my earlier post HERE
Cases referred to above:
Her Majesty’s Revenue and Customs v Stringer  UKHL 31, HL