Anisa Niaz-Dickinson  offers advice on the issue of whether employees can take annual leave during furlough.

Anisa Niaz-Dickinson

THE QUESTION

One question that has been frequently raised with the Kings’ team in relation to the Coronavirus Job Retention Scheme (“CJRS”) is whether or not an employee on furlough can take annual leave during the furough period. This issue has tended to divide opinion. Many lawyers have answered negatively because they consider that the purpose of annual leave (rest and relaxation) cannot be achieved during furlough i.e. the reasoning that was applied to annual leave during sick leave in the HMRC v Stringer and Others line of cases. It is also arguable that furlough in and of itself is a form of leave and therefore it is non sensical for employees to take a separate type of leave, which is fundamentally different, at the same time as being on furlough.

Furthermore, there are practical difficulties involved in requiring an employee to take annual leave during furlough, not least the question of how much to pay them, as contractually the employee is entitled to 100% of salary during annual leave (and also during the furlough period unless the employee agrees otherwise) but only 80% during furlough.

THE “YES” CAMP

However, there has also been a ‘yes’ camp. ACAS, for example, published on its website that employees can take annual leave during the furlough period. Other proponents in the ‘yes’ camp referred to Regulation 15 of the Working Time Regulations (1998) and advised that the employer can simply give notice under that provision to require the employee to take annual leave during furlough to ensure some costs savings and prevent swathes of employees from taking annual leave when businesses are up and running again.

HMRC GUIDANCE IN CLARIFICATION

After much debate and discussion this conundrum appears to now have an answer. HMRC updated the CJRS Employee Guidance on 17 April 2020. That Guidance clarifies that holidays can be taken during furlough but should be paid at the normal rate of pay. Therefore the employer would have to pay the additional 20% of salary during furloughed annual leave.

The Guidance also states that:

“Employers will be obliged to pay the additional amounts over the grant, though will have the flexibility to restrict when leave can be taken if there is a business need. This applies for both the furlough period and the recovery period”.

This suggests that the employer can require an employee to take their annual leave during the furlough period which would ensure a costs saving in terms of holiday pay, with only the additional 20% being paid by the employer.

KEEP MONITORING THE POSITION CAREFULLY

It is probably not significant that this update has not been included in the Employer Guidance as that appears likely to be an oversight which will no doubt be corrected in due course. Perhaps of more concern is the indication that the position will be kept under review. The current position does not therefore appear to be set in stone and those interested should continue to monitor HMRC updates.

           The updated CJRS Employee Guidance can be found at:

           https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronavirus-job-retention-scheme#contents