Holiday Pay, Statutory Leave, Unpaid Leave and furlough

in Employment Law, HR

Holiday Pay

Furloughed employees continue to accrue leave as per their employment contract.
The employer and employee can agree to vary holiday entitlement as part of the furlough agreement, however almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below.

Employees can take holiday whilst on furlough. Working Time Regulations require holiday pay to be paid at the employee’s normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received by the employee in the previous 52 working weeks. Therefore, if a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations.

Employers will be obliged to pay 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.

If an employee usually works bank holidays then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave then the employer would either have to top up their usual holiday pay, or give the employee a day of holiday in lieu.

During this unprecedented time, we are keeping the policy on holiday pay during furlough under review.

Employees returning from family-related statutory leave

Family-related statutory leave includes maternity leave, paternity leave, shared parental leave, adoption leave, parental bereavement leave and unpaid parental leave.

In line with other employees, claims for full or part time employees furloughed on return from family-related statutory leave should be calculated against their salary, before tax, not the pay they received whilst on family-related statutory leave. The same principles apply where the employee is returning from a period of unpaid statutory family-related leave.

Claims for those on variable pay, returning from statutory leave should be calculated using either the:

  • same month’s earning from the previous year
  • average monthly earnings for the 2019 to 2020 tax year

Employees returning to work after being on sick pay

In line with other employees, claims for full or part time employees furloughed on return to work after time off sick should be calculated against their salary, before tax, not the pay they received whilst off sick.

Claims for those on variable pay, returning to work after time off sick should be calculated using either the:

  • same month’s earnings from the previous year
  • average monthly earnings for the 2019 to 2020 tax year

Unpaid sabbatical or unpaid leave

If your employee has been on unpaid sabbatical or unpaid leave, you’ll need to use the amount they would have been paid if they were on paid leave when calculating 80% of their wages.