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Furlough and holiday pay

The latest HMRC guidance for employers issued on the 15 April was silent on whether employees can take holiday while on furlough leave and HMRC was refusing to provide any assistance on this.

However, on the 17 April, HMRC updated their employee guidance to state that it is possible to take annual leave while on furlough. However, the guidance is silent on whether employers can compel employees to take annual leave while on furlough. Under the Working Time Regulations, employers can give employees twice the length of notice as the holiday to be taken (for example two weeks’ notice for one weeks holiday). Many employers would like to do this in order to deplete outstanding holiday, reduce the amount of leave still to be taken when work resumes and to get the government to fund 80% of the holiday payment.

Employees are entitled to be paid 100% of their usual holiday pay, so employers will have to “top up” to 100%, even though they can only claim 80%. Usual holiday pay may have to include overtime, allowances, commission payments and bonuses (depending on the nature of the scheme), even though these payments are not included when calculating furlough pay.

Interesting, the section ends by saying “During this unprecedented time, we are keeping the policy on holiday pay during furlough under review”. Watch this space for further developments.

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