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COVID19: Furloughing – Holiday Pay and Annual Leave Guidance

The government have finally given some further guidance on how annual leave and holiday pay will work with furloughed employees, albeit that it was released after close of business on Friday, and only in the guidance notes for employees, so you would be forgiven for missing it.

Here are some of the questions that  have been answered:

Will an employee accrue annual leave whilst being furloughed?

Yes, they will continue to accrue leave as per their employment contract or the statutory minimum.

Can you lower the holiday pay entitlement whilst in the furlough period?

Yes, but only in respect of  contractual holiday, (that is holiday over and above the statutory holiday allowance) and only with the agreement of the employee.  Any variation must be part of the furlough agreement. However, almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year so you cannot reduce the statutory minimum amount of holiday time staff are entitled to.

Can Staff take holiday whilst being furloughed?

Yes, staff can take holiday whilst on furlough subject to their employers’ agreement. However, employers may require employees to defer taking annual leave because employees will be entitled to their usual holiday pay during annual leave and employers will be obliged to pay the additional amounts due to the employee over the 80%/£2,500 cap. However, given that the 17 April 2020 update to the guidance advises that employers can recoup an employee’s holiday pay via the CJRS up to the 80%/£2,500 limit, some employers may take the view that it would be cost effective to allow workers to take annual leave.

If an employee takes annual holiday during the furlough period how much are they paid?

You are required to pay holiday pay at  the employees normal rate of pay or, where their rate of pay varies, calculated on the basis of the average pay they received in the previous 52 working weeks.  The grant can be used to pay 80% of the holiday pay but employers will need to top up the additional amounts above the grant to ensure that employees are paid their full contractual holiday pay.

What happens to bank holidays which fall during furlough leave?

The employer may wish to cancel any annual leave including bank holidays which are included as part of an employees holiday allowance, which falls during furlough leave.

The amended guidance states that, if employees usually work bank holidays, their employer can agree that this is included in the CJRS grant payment. If the employee usually has bank holidays off, their employer will need to either top up their pay to their usual holiday pay and treat it as holiday, or treat it as a working day and include it in the grant and give the employee a day off in lieu at a later time.

If it is then not reasonably practicable for the cancelled annual leave to be taken in the remainder of the leave year, and if those days fall within the worker’s statutory leave entitlement, the leave should be carried forward to the next holiday year.

Team HB would like to thank Iain Lock who is a Director at Q&A HR, for providing details for our summary above. Iain can be contacted directly on 01920 463777 or be email ilock@qandalaw.co.uk

We hope this information helps you and we are here for you during this difficult time. We will continue to keep you updated as the Government releases new information. Our business contingency plan is in place and we will do everything we can to support our clients during this uncertain period, please do not hesitate to contact us here if you have any concerns or queries.

Visit our COVID19 Business Hub for more information


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The information contained above is for general guidance purposes only. Whilst every effort has been made to ensure the contents are accurate, please note that each individual has different circumstances and it is essential that you seek appropriate professional advice before you act on any of the information contained herein. HB Accountants can accept no liability for any errors or omission or for any person acting on or refraining from acting on the information provided in the above

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