What is Furlough?

What is Furlough?

What is Furlough?

A furlough is a temporary leave of employees due to special needs of a company or employer, which may be due to economic conditions of a specific employer or in society as a whole. These involuntary furloughs may be short or long term, and many of those affected may seek other temporary employment during that time.

On  20 March 2020, the UK government introduced the Coronavirus Job Retention Scheme (CJRS).

The CJRS and its furlough guidance has now been provided on how holiday and furlough interact.

Below are some practical tips for businesses when dealing with employees’ holiday entitlement during furlough leave.

Holiday accrual during furlough

Employees continue to accrue holiday while on furlough. Where an employee gets more than their statutory holiday entitlement (5.6 weeks or 28 days), the employer could agree to reduce their holiday entitlement to the statutory amount. However, the employer would need the employee’s written agreement to do so.

Taking holiday during furlough

Furloughed employees can take holiday during furlough so the bank holidays and any additional holiday that arise during the furlough period, can be taken. However, this is subject to the employer’s normal procedures when requesting holiday leave.

What is less clear-cut is whether an employer can require its furloughed employees to take holiday during furlough. In principle employers should be able to require their furloughed employees to take holiday.

Unless the employment contract states otherwise, this will require the employer to give a furloughed employee notice of double the mandated holiday (so, five days holiday would require 10 days’ notice).

Holiday pay during furlough

Employees’ taking holiday during furlough leave should receive their normal pay for the holiday taken but employers can still claim the subsidised furlough rate (80% pay capped at £2,500 per month) from HMRC.

This could make many employers anxious financially about paying out holiday during furlough leave and therefore the employer may decide to try to defer any taking of holiday until 'normality' resumes.

Refusing holiday during furlough

Employers can refuse holiday requests both during furlough and following the period of furlough leave provided there is a business reason for doing so.

Cancelling holiday during furlough

Employers could also cancel pre-booked holidays, but the employer must give the employee the same number of days’ notice as the original holiday request (so five days leave requires five days’ notice to cancel).

Where an employee wants to cancel holidays during their furlough leave, they would need their employer’s agreement, so employees do not have the right to cancel pre-booked holidays. This is a matter for the employer to decide.

Carry-over of holiday during furlough

While holiday cannot normally be carried over into the next leave year, emergency legislation has been introduced to allow up to four weeks’ (20 days) holiday, which cannot be taken because of COVID-19, to be carried forward over the next two leave years.

While this does not prevent employers on insisting on some holidays being taken, it allows employers flexibility when dealing with holiday requests. An employer could also consider allowing carry-over for additional holiday allowance over and above the four weeks’ holiday to ensure flexibility for both the employer and its employees.

Consider and communicate how holiday will be handled

Given this unprecedented time, it would be wise for employers to have a clear line of communication with its employees concerning holiday, whether the employee is on furlough leave or not. It is a good idea to:

  • Talk about any plans to use or cancel holiday during coronavirus as soon as possible
  • Discuss why holiday might need to be taken or cancelled
  • Listen to any concerns from staff
  • Welcome and suggest ideas for other options
  • Consider everyone’s physical and mental wellbeing
  • Prepare a temporary holiday policy to consider how holiday will be handled during this crisis.