Coronavirus Job Retention Scheme and holiday pay

by | Apr 23, 2020

Question – Can you clarify how to calculate holidays for furloughed employees? I know it should be 100%, but is that on normal hours and normal rate or on average pay? 

I presume that you are referring to Bank holidays. It will very much depend on the policy of the employer and whether the employee is salaried or hourly/daily paid.

It should be straightforward for salaried staff as the furlough would be 80% of their normal salary subject to the £2,500 cap. 

If furloughed over a Bank holiday period the employer will need to set a policy as to whether they allow them to carry those days forward.  

HMRC have clarified Holiday Pay and the extract from the full guidance is below: 

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.

 

Question: If an employee has holiday booked (and still wants to take it during the period while they are furloughed) can the employers claim the 80% of that holiday pay back from the Government and pay the remainder of 20% but not claim that 20% portion back?   

If on holiday then technically not furloughed and should get their normal rate. Employer would not be able to make furlough claim for that period. 

Employer should have a policy on carry forward of holiday and whether it can be paid. See the guidance from HMRC above.

 

Question: Have you got any advice on how to account for bank holidays that form part of their employees holiday entitlement – how do you calculate this extra 20% on the averaged pay or on the normal pay 

This was covered by the HMRC guidance issued last Friday (18 April), see below: 

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.

If have any further questions on how you make an applicatin through the CJRS and claim for furloughed employees please contact our team at abg@abggroup.co.uk. 

 

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