Owner Kate Upcraft Consultancy Ltd
Share this content

Furlough scheme and holiday pay explained

Kate Upcraft answers FAQs on the interaction of the coronavirus job retention scheme (CJRS) and workers’ holidays, including the tricky calculation of holiday pay.

19th May 2020
Owner Kate Upcraft Consultancy Ltd
Share this content
closed sign on outskirts of Southend during the coronavirus lockdown
istock_Laurence Berger_aw

Furlough pay is a new type of paid statutory leave which has been introduced very quickly without any time to consider the employment law implications.  

It’s to their credit that HMRC published any information around holiday entitlement as part of the CJRS guidance, as this is strictly the remit of the Business, Energy and Industrial Strategy (BEIS) department. However, we had to wait until the 13 May for BEIS to produce guidance on both holiday entitlement and holiday pay during the pandemic.

Territorial coverage

As employment law is a devolved matter to Northern Ireland, the guidance published by BEIS only applies in Great Britain. For workers with contracts drawn up under the Employment Rights (Northern Ireland) Order, refer to this guidance.

Register for free to continue reading

It’s 100% free and provides unlimited access to the latest accounting news, advice and insight every day. As well as access to this exclusive article, you can:

Tick iconView all AccountingWEB content
Tick iconComment on articles
Tick iconWatch our digital shows and more

Access content now

Already have an account?

Replies (24)

Please login or register to join the discussion.

avatar
By Ian McTernan CTA
20th May 2020 11:23

I can see the employer's reaction to this: employee says 'you must pay me 100% I'm going on holiday', employer who has zero income says 'take the rest of your life off' and gets rid of them.

Employees need to realise employers are not bottomless pits of money. They are currently sitting at home being paid for doing nothing (in a lot of cases). Count that as holiday. In the meantime the employer is struggling to keep the business afloat so that the employee has a job to come back to.

Someone needs to change the rules to reflect reality and employees should be voluntarily giving up their holiday 'entitlement' to help out their employers- not demanding full pay when they haven't done anything for two months.

Thanks (1)
Replying to Ian McTernan CTA:
avatar
By psimonparsons
20th May 2020 16:29

If the employee is on 80% Furlough, the employer has actually paid nothing. So no money is leaving any bottomless pit. However, employers need to budget in the fact that they have legal obligations to their employees for holiday payments, this law has been established for many years. And with Furlough the employer would only be meeting 20% of that liability. Balance yes, one sided logic no.

Thanks (1)
avatar
By sbeardon
20th May 2020 12:40

Am I correct in saying that the employer has to pay 20% of the holiday pay as the rest would be included in the furlough pay?

Thanks (0)
Replying to sbeardon:
Morph
By kevinringer
20th May 2020 13:08

Employer pays 100% and reclaims 80% so actual cost 20%.

Thanks (1)
Replying to kevinringer:
avatar
By claire spurrell
20th May 2020 14:30

Am I correct in thinking employer cost may not be just 20%? Eg variable hours minimum wage worker. 5 days holiday taken in may 2020. So employer top up cost is x hours @ new 20/21 min wage rate less 5/31 of furlough pay (80% of higher of 19/20 average or equivalent month last year)??

Thanks (0)
Replying to claire spurrell:
avatar
By psimonparsons
20th May 2020 16:31

No. NMW does not apply to time not worked such as Holiday. The requirement of the holiday pay amount are covered by ERA and WTD i.e. normal earnings or for variable paid employees, 52 week average earnings (exclude zero pay weeks from the average as they don't count). No requirement for NMW.

Thanks (0)
Replying to claire spurrell:
avatar
By psimonparsons
20th May 2020 16:31

No. NMW does not apply to time not worked such as Holiday. The requirement of the holiday pay amount are covered by ERA and WTD i.e. normal earnings or for variable paid employees, 52 week average earnings (exclude zero pay weeks from the average as they don't count). No requirement for NMW.

Thanks (0)
Replying to claire spurrell:
avatar
By psimonparsons
20th May 2020 16:31

No. NMW does not apply to time not worked such as Holiday. The requirement of the holiday pay amount are covered by ERA and WTD i.e. normal earnings or for variable paid employees, 52 week average earnings (exclude zero pay weeks from the average as they don't count). No requirement for NMW.

Thanks (0)
Replying to claire spurrell:
avatar
By psimonparsons
20th May 2020 16:31

No. NMW does not apply to time not worked such as Holiday. The requirement of the holiday pay amount are covered by ERA and WTD i.e. normal earnings or for variable paid employees, 52 week average earnings (exclude zero pay weeks from the average as they don't count). No requirement for NMW.

Thanks (0)
Replying to claire spurrell:
avatar
By psimonparsons
20th May 2020 16:31

No. NMW does not apply to time not worked such as Holiday. The requirement of the holiday pay amount are covered by ERA and WTD i.e. normal earnings or for variable paid employees, 52 week average earnings (exclude zero pay weeks from the average as they don't count). No requirement for NMW.

Thanks (0)
Replying to sbeardon:
avatar
By pharvey
20th May 2020 14:03

sbeardon wrote:

Am I correct in saying that the employer has to pay 20% of the holiday pay as the rest would be included in the furlough pay?


That's how I understand it including if we insist that the recent spate of Bank Holidays are taken as leave - the furlough scheme has been a lifesaver but a kick in the teeth for those that have continued to work through their dedication or professionalism (and were able to) to keep companys' and organisations afloat.
Thanks (2)
avatar
By essex accountant
20th May 2020 13:07

the picture is from Southend-on Sea and the message was being ignored last weekend - it was packed and social distancing was impossible! Had to queue for 20 minutes to buy an ice cream ....

Thanks (0)
Morph
By kevinringer
20th May 2020 13:11

I've been in contact with our furloughing employers. Most have decided to compel employees to take some annual leave. No employees have objected. Many are grateful they've still got a job, for now.

Thanks (1)
Morph
By kevinringer
20th May 2020 13:14

HMRC's first holiday pay guidance was issued after Easter by which time weekly paid employees had been paid. Most had been paid 80%. Employers don't want to give them a day off in lieu so many of my employers are choosing to compel the employees to take paid holiday leave during furlough. This assumes the employer has sufficient funds to pay the additional 20%.

Thanks (0)
Morph
By kevinringer
20th May 2020 13:18

Kate says 'The legal risk of an employer forcing workers to take holiday during furlough is that the purpose of annual leave is to be able to rest during time away from the workplace, which could be argued is severely restricted during the lockdown.' I would argue that employees can (and do) rest now and get better rest than in normal times. What is more restful: sitting in your back garden or catching a flight to Spain (in normal times). I know that some have suggested employees may be anxious being confined to home but is this the responsibility of the employer? I know of many in these strange times are happier at home than away because they feel safer.

Thanks (2)
avatar
By markmorley
21st May 2020 22:30

Hi Kate is the 1.6 part of the statutory leave related to the public holidays and is that why the pay is basic rate? what rate of pay should be applied to this bank holiday? is it the normal 52week average with variable commission on the basis this is part of the first 4 weeks or s it basic pay?. is there a definition of variable paid employees or does it cover say sales people on basics plus commission where you'd normally be paying specific commission on specific sales .

Thanks (0)
avatar
By markmorley
21st May 2020 22:31

Hi Kate is the 1.6 part of the statutory leave related to the public holidays and is that why the pay is basic rate? what rate of pay should be applied to this bank holiday? is it the normal 52week average with variable commission on the basis this is part of the first 4 weeks or s it basic pay?. is there a definition of variable paid employees or does it cover say sales people on basics plus commission where you'd normally be paying specific commission on specific sales .

Thanks (0)
avatar
By LindaP
29th Jun 2020 11:14

Employee is contracted 4 days a week and was asked by employer to take 5 days holiday Whilst on furlough - these days were then booked in June. Employee is usually paid same amount every month ie. 1/12th of annual salary
Employer says there were 16 potential working day so divided monthly furlough pay by 16 to calculate daily furlough pay and are only topping up to the usual daily salary for the 5 holiday days which is less than 20% of the usual daily rate.

Surely top up payment should just be 20% of normal daily rate x 5 days

Is this legal as it seems very unfair?

Thanks (0)
Replying to LindaP:
Morph
By kevinringer
29th Jun 2020 13:11
Thanks (0)
avatar
By LindaP
30th Jun 2020 16:23

Yes but it still does not categorically state Employee should receive 20% of daily rate as top up on holiday days irrespective of number of working days in the month!

Thanks (0)
avatar
By erykos1986
04th Dec 2020 14:47

Hi there!Thanks letting me in!My question is:
I work for a Greek restaurant for 1year and 10 months now This year starting from March i am under the fourlough scheme with them and i get my fourlough every month!I don't have an contract with him,and my average worked hours were around 50/week!With the monthly gross of 1950£ and almost the
net amount salary for every month(fourlough salary 1400£),and with no holiday pay at all from the start of the year,can anyone explain how much i am.entitled to get holiday pay or to calculate ???Really appreciate your help!Thank you!

Thanks (0)
Replying to erykos1986:
Morph
By kevinringer
06th Dec 2020 12:50

If you are on fixed pay I would expect your furlough pay to be 80% of £1950 = £1560. You can use the calculator at https://www.tax.service.gov.uk/job-retention-scheme-calculator/start to calculate exactly.

Your holiday pay entitlement is at https://www.gov.uk/holiday-entitlement-rights. The additional rules for coronavirus are at https://www.gov.uk/guidance/holiday-entitlement-and-pay-during-coronavir....

Thanks (0)
Replying to kevinringer:
avatar
By erykos1986
07th Dec 2020 08:53

Good morning Kevinringer!Thank you very much for your help,really appreciate!
I've looked for the gov website and my calculations are the same with the previous ones!The only problem is my employer don't allow us to talk with the accountants and the payroll company!And he is supporting of course them!For all the 2020 year i have received 540£as holiday pay!There is an difference oh 1050£ he still owes me!And he is still saying these are the holiday entitlement for me!
One more question please if you can:
All the remaining balance he owes me frok holiday pay,has to be paid in full on this month's salary or it can be paid in the following months???Thanks again!Best regards!

Thanks (0)
avatar
By Jim_S
02nd Feb 2021 17:37

If my employee is not on furlough but has qualified to be able to claim and he requests Holiday which is approved can I still use furlough to claim the 80%.

Thanks (0)