The Department for Business, Energy & Industrial Strategy, has issued guidelines on how to deal with holiday pay during the virus outbreak. Here we summerise some key points.

Holiday Entitlement

The guidance confirms that furloughed workers continue to accrue statutory holiday (being 5.6 weeks for full-time workers) whilst on furlough and that any holiday they take does not disrupt their period of furlough.

Taking Holiday

The guidelines also confirm that, as expected, an employer can require a worker to take holiday whilst on furlough so long as the correct notification under the Working Time Regulations is given.  However, the guidance states that employers should consider whether any restrictions the worker is under, such as the need to socially distance or self-isolate, would prevent the worker from enjoying their leisure time and relaxing.

Bank Holidays

Employer obligations with regards to bank holidays have also been clarified:

Where a bank holiday falls inside a worker’s period of furlough and the worker would have usually worked the bank holiday, their furlough will be unaffected by the bank holiday and this will be treated as a normal day for which the worker is furloughed.

If the employee usually takes the bank holiday as annual leave then either:

the employer must pay the correct holiday pay for the worker for that bank holiday, or the holiday is deferred until a later date (at which time the worker should still receive their full holiday entitlement).

Holiday Pay

As expected, holiday pay should be calculated based on the employees’ normal rate of pay, not the 80% pay they may be receiving whilst on furlough. This will require employers to top up the difference, as HMRC will only cover the cost of 80% of holiday pay (subject to the £2,500 monthly cap). This does, however, mean that HMRC will fund most of the cost of an employee’s annual leave entitlement whilst on furlough, something which will no doubt be attractive to employers.

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