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HMRC confirmed that furloughed workers could take annual leave without breaking furlough, that the employer has to pay full salary for holiday taken by furloughed employees and the employer can continue to claim the furlough grant for employees who are on furlough and holiday concurrently. However, it was unclear whether an employer could require staff to take holiday, and the position relating to temporary and agency staff was also still unclear. The guidance confirms that workers placed on furlough continue to accrue statutory holiday entitlements, and any additional holiday provided for under their employment contract, whilst on furlough.  

Employers can continue to claim through the job retention scheme for furloughed workers, even when they are taking holiday.     

The employer is required to top up the employee’s gross pay when holiday is taken, if the employee is entitled to higher holiday pay than their furlough pay. The amount of pay that a worker receives for the holiday they take depends on the number of hours they work and how they are paid for those hours. The principle is that pay received by a worker while they are on holiday should reflect what they would have earned if they had been at work and working. Holiday pay, whether the worker is on furlough or not, should be calculated in line with current legislation based on a worker’s usual earnings. Where a worker has regular hours and pay, their holiday pay would be calculated based on these hours. If they have variable hours or pay, their holiday pay is calculated as an average of the previous 52-weeks of remuneration, excluding weeks in which there was no remuneration. Holidays taken whilst an employee is on furlough will be, therefore, at least in part, subsidised by the job retention scheme, as the Employer can continue to claim the 80% furlough grant. 

Allowing furloughed employees to concurrently take holiday also increases flexibility for employers, and allows them to potentially ensure that furloughed workers do not return to work with excessive amounts of annual leave remaining.     

The updated guidelines now advise that employers can require staff to take annual leave while they are furloughed, subject to usual statutory notice periods. However, the guidance advises businesses to “engage with their workforce and explain reasons for wanting them to take leave before requiring them to do so”, and “employers should consider whether the aim of annual leave, rest and relaxation, is met if someone takes annual leave during furlough if they are required to socially distance or self-isolate”. It, therefore, implies that consideration should be given if the employee has been formally advised that they are “at risk” and should to self-isolate for medical reasons. 

Despite the various updates and clarifications issued by HMRC, it is becoming increasingly clear that the rules around what can and cannot be claimed under the furlough scheme are complex. It is apparent that employers are unintentionally not always claiming the correct furlough grant via the HMRC portal, and that in most cases claims are being inadvertently overstated. This is particularly the case when the pay period includes a mix of work days and furlough, and where the employer is topping up the furlough pay, including holiday top ups. 

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Wren Professional Services Ltd

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0115 943 6493


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