Requiring Furloughed Employees to Take Annual Leave

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Requiring Furloughed Employees to Take Annual Leave

Key Contact – Claire Knowles

Author –  Adam McGlynn

The government has published new guidance on the interaction between annual leave and the Coronavirus Job Retention Scheme (CJRS). This finally provides an answer to the much-debated question ‘

‘Can an employer require its workers to use annual leave entitlement while on furlough leave?’

The answer provided by the guidance is essentially ‘yes’ provided that workers are given notice in advance of the first day of leave equal to double the length of the leave being taken. Employers can also cancel scheduled annual leave provided the workers are given notice in advance of the first day of leave equal to the length of the scheduled leave. These notice period requirements can be waived by agreement between the parties so effective communication and cooperation can be mutually beneficial when organising holiday use.

However, the guidance then introduces some unhelpful ambiguity by stating that if employers do require employees to take annual leave they should consider whether those employees are able to achieve meaningful rest under the circumstances. This introduces the possibility of a retrospective challenge by workers arguing that they have not received their proper annual leave allocation as they were unable to achieve ‘meaningful rest’ during lockdown.

No further guidance has been provided on how to make this assessment or how it should affect an employer’s decision-making so at this stage it seems that Government are merely asking employers to be considerate when requiring employees to take annual leave. It seems unlikely that a furloughed employee would not be able to achieve meaningful rest as employees who are not on furlough leave, but are otherwise experiencing similar circumstances, are able to use annual leave as usual.

It would be wise, however, for businesses to keep records of their consideration here as well as the legitimate business reasoning behind their decisions when requiring employees to use annual leave during a period of furlough leave. It is also suggested that any requirements to take leave should be reasonable and proportionate so the requested leave should not exceed the length of the Furlough period and should leave workers with a reasonable leave allowance for the remainder of the year.

Government guidance suggests employers should engage with staff and explain reasons for requiring them to take annual leave in advance. Some legitimate business reasons may include:

  • Annual leave continues to accrue during a period of furlough leave so it is reasonable to require employees to use that entitlement at a proportionate rate.
  • A business may be experiencing a reduced workload now which may be expected to increase later in the year. Allowing employees to save their annual leave entitlements when work is quiet only to use it when busier would be counterproductive.
  • Many businesses are experiencing financial difficulties and it is a more efficient use of funds for employees to use annual leave while on furlough leave so that employers have 80% of those costs reimbursed by HMRC. This point is relevant both where the employer is considering retaining the employee, in which case the alternative would be greater annual leave expenditure later in the year, and where the employer is considering redundancies, in which case the alternative is greater annual leave entitlement payable as a lump sum on termination.

The guidance confirms that any leave taken should be paid at 100% of normal salary so employers who are paying at 80% during Furlough Leave should be careful to ensure that they do apply a salary ‘top up’ to any days designated as leave.

The guidance also discusses Bank Holidays and suggests that the options for employers are either for Bank Holidays to be designated as ‘holiday’ – in which case the workers should receive 100% salary – or for a leave day to be accrued to be taken at a later time during the year. It suggests that either arrangement should be agreed in advance with the worker. Clearly it would have been useful if this guidance had been made available in advance of the Easter and Mayday Bank Holidays.

For more information, please contact our employment team.

Claire Knowles – Partner

Mark Alaszewski – Associate

Rebecca Mahon – Solicitor

Adam McGlynn – Trainee Solicitor

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