Legal advice: Holidays during furlough

The government has considered how workers’ entitlement to annual leave will be affected by COVID-19 and furlough, and has passed some regulations on the subject. There are plenty of questions still unanswered, but the there are points of principle which should be borne in mind

Will employees continue to accrue holiday during furlough?

It is likely that the 5.6 weeks’ leave (28 days for full time workers) under the Working Time Regulations 1998 continues to accrue during furlough leave.

Where a worker does not take annual leave in the relevant leave year because they were on furlough, can they carry it forward to the next leave year?

The government has passed emergency legislation relaxing the restriction on carrying over the four weeks’ leave (20 days for full time workers) derived from the Working Time Directive (WTD leave) with effect from 26 March 2020:

where it was not reasonably practicable to take it in the leave year “as a result of the effects of the coronavirus (including on the worker, the employer or the wider economy or society)”.

ACAS advice suggests that this new carry-over rule could apply where a worker has been put on furlough and is unable to take leave due to COVID-19.

The regulations also permit an employer to resist an application to take this leave where it has “good reason” to do so”.

It is important to remember that this is not a green light for workers to take carry over all their WTD leave (let along the balance of 1.6 weeks or any extra contractual entitlement).

Further, while at first sight this looks like legislation solely benefiting workers, it does benefit employers because they have more scope to delay the holiday accrued during the pandemic to a much later and hopefully economically more favourable time.

Taking leave during furlough

From a WTD perspective, it is likely that workers could take annual leave during furlough. However, it remains unclear how HMRC will treat reimbursement of holiday pay paid during it, i.e. will they treat it as normal furlough reimbursement? Operators who put drivers on leave during furlough to limit accrual run the risk of not getting reimbursement for it, or breaking the 3-week furlough rule completely.

Can an employer require employees to take accrued holiday once the furlough period comes to an end?

In principle, the employer could require that annual leave is taken once the furlough period comes to an end. This is subject to giving statutory notice (of twice the length of leave to be taken). I am aware that some employers are putting employees on three weeks’ furlough then one week’s holiday.

So what to do?

Clearly, there is no right answer, and a balance of risk to be addressed. That said, operators may find it attractive to designate furlough as a period during which no annual leave may be taken, at least until there is further guidance available. Given that it is possible to carry WTD leave forward to the next two holiday years, there is less likely to be significant demand for holiday to be taken in a short space of time.

There are further options and requirements that employers should consider, for example in relation to designating which type of leave is taken in which order, and collective agreements to deal with what happens to the 1.6 weeks, or indeed any extra contractual entitlement. Such questions are probably outside the scope of this question and answer.

NB: this information is given as a guide to relevant principles and is not legal advice. Readers who require legal advice should seek specific advice relevant to their circumstances.

Peter Woodhouse, Partner, Head of Team, Head of Business Sector, Stone King LLP

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