How does furlough impact bank holidays?

As the holiday season approaches, one question that may be on employers’ minds is how their furloughed employees will be affected by the upcoming bank holidays. Our Employment Law team discusses this here, outlining some of the rules regarding annual leave and furlough, and an employer’s options regarding bank holidays.

Entitlement to bank holidays

Employees are entitled to 5.6 weeks’ annual leave per year, or the pro rata equivalent if they do not work full time. There is no statutory right to time off on a bank holiday; some employers choose to include bank holidays as part of their employees’ statutory holiday entitlement, but you are not obligated to do so. If bank holidays are included in an employee’s holiday entitlement then this should be stated in their contract of employment.

Holiday entitlement and furlough

Employees continue to accrue holiday while on furlough leave, and they can take annual leave without disrupting their furlough leave.

As an employer, you can require your employees to take or not take annual leave while they are furloughed as long as you give the employees the necessary notice. The length of notice you are required to give is as follows:

• double the length of the holiday to be taken when requiring the employee to take annual leave on specific days
• the length of the planned holiday if requiring an employee to cancel holiday or to not take annual leave on certain dates.

If an employee takes annual leave while on furlough this may affect their pay. You should calculate the holiday pay for a furloughed employee in the usual way, according to the Working Time Regulations.  Employees who receive less than their usual wages while on furlough will be entitled to be paid their usual full pay for the days that are designated as annual leave.  You can still claim 80% of the employee’s wages from the Government while they are on annual leave but you will need to ‘top up’ their wages to 100%.

How to treat bank holidays when the employee is on furlough

If the employee would not usually work on the bank holiday, their furlough arrangements are unaffected and the employee should continue to receive furlough pay as usual.

If the employee would usually take the bank holiday as annual leave, you have two choices:

1. Treat the day as annual leave and pay the employee accordingly.
2. Not treat the day as annual leave and provide a day off in lieu at a later time.

You can require the employee to take the bank holiday as a day of annual leave as long as you provide the furloughed employee with the necessary notice. As a bank holiday is one day the required notice is at least two days. You should give this notice even where the furloughed employee would normally have taken the bank holiday as a day of annual leave had they not been on furlough. You must also ensure the employee is paid their full holiday pay for this day.

If you decide not to treat the day as annual leave, the employee’s pay will be unaffected.  However, you will need to provide them with an alternate day’s annual leave to ensure they receive their statutory entitlement.  Employers may decide not to treat bank holidays as annual leave where it is not “reasonably practicable,” for example, if they cannot afford to top up the employee’s wages to 100%.  If you decide not to treat a bank holiday as a day’s annual leave and decide to provide a day off in lieu instead, you should be aware that under new regulations passed in March 2020, the employee may be entitled to carry this entitlement over into the next two holiday years.

Employers have a couple options in relation to how to treat bank holidays for furloughed employees. You will need to weigh up the benefits and drawbacks of each option and make the choice that best suits the needs of your business.  If you have questions regarding furlough leave, holiday entitlement or other requirements regarding employment law, you can contact the team today on 023 8071 7717 or email employment@warnergoodman.co.uk.

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ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.