How to manage Annual Leave during Furloughing Periods

Now the Government has extended the furlough Job Retention Scheme until 31 March 2021, we bring you full guidance in relation to Annual leave and what you can do to manage Annual Leave within your workplace over the coming months.


Does annual leave accrue during Furlough Periods?

Employees placed on furlough continue to accrue statutory holiday entitlements under the Working Time Regulations and any additional holiday provided for under their existing employment contract.


Can Employees be required to take annual leave?


As an Employer you can require Employees to take annual leave while they are furloughed, subject to usual statutory notice periods. Under the Working Time Regulations 1988 reg.15 (SI 1998/1833).

You may nominate dates on which an Employee must take some or all of their statutory annual holiday entitlement, provided that you give the required advance notice. See taking holiday [Taking holiday]


The notice required is the minimum of twice as many days as the number of the holidays that you require your Employee to take.

  • For example, if you require your Employee to take 5 days’ holiday, you must provide the Employee 10 days’ notice.


If you require an Employee to take holiday then you should consider the guidance which states that you should consider whether any restrictions the Employee is under, such as the need to socially distance or self-isolate, would prevent the Employee from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday.


How much pay are your Employees entitled to if they take holiday whilst on furlough?


The Government’s latest guidance for Employees sets out that in keeping with the Working Time Regulations, Employees should be paid for any holiday taken at their normal rate of pay or, if their pay varies, see the guidance [standard guidance] on the basis of the average pay that they have received over the last 52 weeks in which they worked.


What this means is that you will be obliged to pay your furloughed Employees who take annual leave a top up over and above the 80% of their salary that you are able to claim from the Government.


In relation to bank holidays, Employees can either take the bank holiday as annual leave, and be paid under the terms of their employment contract, or bank holiday can be deferred if this arrangement is agreed between the you and your Employee.


Can holidays can be carried over?


New Legislation has now been passed namely, The Working Time (Coronavirus) (Amendment) Regulations 2020 allowing Employees to carry forward some or all of the basic four week annual holiday entitlement where it has not been reasonably practicable for the Employee to take leave due to the coronavirus pandemic.


The 5.6 weeks of statutory holiday is split into 4 weeks and 1.6 weeks, and there are some differences in the rules that apply:

  • The 1.6 weeks can be carried forward into the following leave year if a written agreement exists between you and the employee.
  • Generally, the 4 weeks cannot be carried into future leave years, so you must facilitate these weeks being taken within the relevant leave year


Under certain circumstances you must allow the 4 weeks to be carried into future leave years. Where an Employee cannot take annual leave due to them being on maternity leave or sick, you must still allow Employees to carry their annual leave forwards. These rights remain unaffected by an Employee being furloughed.


It is not a requirement to provide notice that the Employee will be able to carry holiday forward if they do not take it. However it is unlawful to prevent Employees from taking holidays to which they are entitled to, to alleviate this and ensure Employees do not miss out it is best practice to inform Employees of both the need to carry forward and how much that will be.


Are there changes to ‘payment in lieu’ for carried leave?


Carried over leave is still subject to the usual rules around payment in lieu. You should facilitate Employees taking their annual leave and not replace it with a financial payment (known as payment in lieu).

However, if the Employees leaves employment, you must pay the Employee for any untaken leave. This will include the carried leave under the coronavirus exemption, along with any leave that they have accrued in the relevant leave year.

The payment in respect of such untaken leave is based on a statutory formula set out in reg.14 of the Working Time Regulations.


Next Steps

A Coronavirus Annual Leave Policy should be drafted and circulated to your Employees.

If you have any questions, please contact a member of our HR or Employment Law team on: 01254 467156







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