Furlough and holiday during the Christmas period

11th Dec 2020
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Can you believe there are only two more Saturdays until Christmas?! I for one am in full-on festive mode. My tree is up, the baubles strategically placed on top and out of my cat’s reach, and I’ve been blasting my ‘Xmas Hits’ playlist at full volume throughout my apartment, much to the chagrin of my long-suffering partner. It feels like a well deserved holiday at the end of a very crap year and even more well deserved time off.

But this Christmas has posed a new problem for the world of payroll - what happens with furloughed employees, especially as many would normally take Christmas and New Year’s as annual leave? Can they be furloughed for this period? 

Where a bank holiday (namely Christmas Day, Boxing Day and New Year’s Day) falls inside an employee’s period of furlough and that employee would have normally worked this bank holiday anyway, then their furlough will be unaffected. However, if the employee would normally have taken these days as part of their annual leave then you, as the employer, have two options:

a) They can take the bank holiday as leave - If the employee does take the bank holiday as annual leave whilst on furlough then holiday pay must be paid instead.

b) They defer the bank holiday - if the employee doesn’t take the bank holiday as annual leave then this must be deferred as the employee will still be entitled to these days as leave. So they can take them at a later date.

So what happens with holiday leave during furlough then? Furloughed employees still continue to accrue annual leave entitlement as per employment law. Employees can agree to vary their holiday entitlement with their employers as part of their furlough agreement but workers are still entitled to a minimum of 5.6 weeks of statutory paid annual leave each year. This is non-negotiable.

Employees can still take holidays whilst on furlough though if they are being flexibly furloughed then any hours they take as holiday during the claim period should be counted as furloughed hours and not working hours. You should not place employees on furlough just because they’re going to be on paid leave or because you usually do less business over the festive period. (However, if you expect your business to be shut down completely or to be severely affected over the 2 week period due to the pandemic then you can of course still claim under the Coronavirus Job Retention Scheme).

A nice succinct summary of this I read online reads as follows:

“If you were going to furlough [employees] anyway then there is nothing to stop you doing it whilst they are on (pre-booked) holiday, or forcing them to take holiday (provided you give them adequate notice). If, however, you are 'furloughing' them because they've booked a couple of weeks off, then you are abusing the system and do not have a valid claim.”

This does mean that you will have to pay the employee’s holiday pay at the normal rate of pay and will be required to pay employees who are on holiday additional amounts over the grant to make up their usual holiday pay. If an employee usually works bank holidays then you can agree that this is included in the grant payment.

Whew! So a lot to digest but I hope that helps to clear things up a little bit. But as always, if in doubt please check the full guidance on the HMRC website. And once that’s all sorted, get your tinsel headdress on, pop open the mulled wine and start looking forward to the coming festivities!

Written by Aoibheann Byrne

BP

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