The FSB Legal Advice line has unsurprisingly received a large volume of calls from members seeking advice in relation to the employment law and taxation aspects of furlough and the CJRS, as we all navigate this new landscape.
One of the issues on which government advice has shifted in relation to the CJRS is the taking of holiday whilst on furlough (initial government guidance on this issue was silent).
Government guidance to the CJRS now confirms that workers can continue to take annual leave while on furlough and this will not break the furlough period (employees are required to remain on furlough for a minimum of 3 weeks during any single furlough period under the terms of the CJRS).
Usually, employers can require their staff to take periods of annual leave as long as they provide at least twice the amount of notice of the time to be taken. For example, if they wish staff to take one week’s leave, they should provide two weeks of notice.
Employers may wish to consider taking this action in relation to furloughed staff who may otherwise build up a bottleneck of untaken annual leave towards the end of the annual leave year (or may simply agree with their employees a period of annual leave). To preserve employee morale employers should engage with their workforce and explain reasons for wanting them to take leave before requiring them to do so by written notice.
Workers on furlough are unlikely to need to carry over annual leave due to their ability to take annual leave during furlough, however, in an amendment to the Working Time Regulations 1998, employees may now carry over up to four weeks of leave into the next two leave years where it was not reasonably practicable for the worker to take leave as a result of the coronavirus pandemic. Government guidance states that employers should exercise caution in serving notice on employees to take their 4-week statutory annual leave during furlough (by giving twice as much notice as the period of annual leave the employee is required to take) where any restrictions the worker is under, such as the need to socially distance or self-isolate, would prevent the worker from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday under the European Working Time Directive. This may particularly apply to employees who are required to shield and stay at home during the pandemic.
Also, where an employee cannot take annual leave due to them being on statutory parental leave, such as maternity leave or due to them being sick, employers must still allow workers to carry their annual leave forwards. These rights remain unaffected by a worker being furloughed.
Employees should be paid in full for statutory annual leave taken (rather than at the reduced furlough rate of pay). Employees will also need to be paid their normal wage for contractual annual leave taken where this has not been renegotiated. This is because statutory holiday pay, whether the worker is on furlough or not, should be calculated in line with current legislation and caselaw, based on a worker’s usual earnings. The underlying principle established in caselaw is that a worker should not be financially worse off through taking annual leave. Where a worker has regular hours and pay, their holiday pay would be calculated based on these hours. If they have variable hours or pay, their holiday pay is calculated as an average of the previous 52-weeks of remuneration excluding weeks in which there was no remuneration or reduced remuneration due to taking statutory leave; and arguably excluding weeks when the employee’s pay was temporarily reduced due to receiving a lower rate of pay when not working during furlough.
This means that, while 80 per cent of their wages up to the CJRS cap can still be claimed under the CJRS, the employer will need to fund the remaining 20 per cent themselves.