Employees on furlough and holiday

Whilst employees are on furlough, their holiday still continues to accrue and the employer can ask them to take holiday whilst on furlough.  You have to pay them their full salary for the days that they take as holiday but this will only cost you the top up from furlough amount to the full contractual salary.

If your employees do not usually work bank holidays and take those days off, if they are furloughed they are entitled to add those days to their annual leave entitlement when they return to work from furlough.  The annual leave period for this year has been extended and holiday can be carried over until 2022.  Alternatively, we would suggest that you consider paying the employees for bank holidays whilst they have been on furlough.  If they were furloughed before 10 April 2020, you will need to pay the holiday for Easter Friday, Easter Monday and two May bank holidays.  If you would like to discuss how to do this correctly, please contact us on 01245 261883.

Do you pay overtime to your employees whilst paying just basic pay whilst they are on holiday?

The Employment Appeal Tribunal decided last week that when an employee takes their initial holiday (up to the point of the initial statutory minimum of 20 days per year for a full time employee, it does not include the 8 bank and public holidays) they are entitled to be paid what they would have received had they been at work.

They should not be worse off for taking holiday. They have interpreted that to mean that the employee should receive an average sum for overtime they work, even if on the particular week they are on holiday there won’t be any overtime.

Some employers already pay an element in their holiday pay to cover overtime. Where overtime is compulsory then most employers already pay holiday pay that includes the overtime being missed but this new ruling relates to overtime worked voluntarily.

Unfortunately the decision did not detail how to calculate what the payment would be but the suggestions are that it will be the average overtime worked in either the 12 months prior to the holiday or 12 weeks prior to the holiday. That uncertainty will not help and further guidance is expected from the Government on that issue.

In addition, there is the risk that where employers have, to date, not paid holiday pay to include overtime then employees could claim unlawful deductions. Any gap of 3 months either since the last holiday, or between holiday periods, will break the chain or stop the remainder being claimed as “unlawful deductions”. However, the employees could still make a breach of contract claim for under payments made in the last 6 years.