On Friday the 17th of April HMRC issued guidance on the calculation of furlough pay, which included how to treat holiday pay. Upon reading the guidance it's clear that a business decision needs to be made regarding whether as a business it allows annual leave to be taken by staff on furlough. There are various factors that would need to be considered.

Firstly, anyone taking annual leave would have to be paid their standard holiday pay as calculated under the working time regulations, that means anyone furloughed on less than 100% of their pay would need to have their pay topped up to their standard holiday rate for that period. I can see the advantage of those being paid at a lower rate requesting leave but why would someone furloughed on 100% decide to do so?

Those organisations that have furloughed their staff at lower than 100% of their pay to the maximum amount that they can claim under CJRS rules, now have a business decision regarding the affordability of paying the top up.

Public holidays are mentioned, for those who normally have these days off, a day’s annual leave is taken as appropriately. If as an organisation it is decided that this is to continue during a furlough period, then the topping up rule will apply.

Easter has traditionally only needed 2 days leave to cover this period for the Monday and Friday, while ethically, you would be paying 100% for only the 4 days of the whole Easter weekend.

One option in the guidance is to do nothing and allow staff members to take these annual leave days off in lieu. Another business decision.

I now come to what I call the ethical decision. Does an organisation request or force employees to take annual leave during furlough absence? Employment legislation regarding annual leave has not changed. Notice at double the amount of leave to be taken should still be given. Effectively, an organisation could furlough an employee for 3 weeks stating that week 3 is going to be annual leave. Assuming that an employee’s weeks 1 and 2 will be at the CJRS rate of 80%, this means that for 20% increase in wages they lose 5 days annual leave. The obvious 20% pay increase is probably welcome, but the only real gain to them, is that they are now on annual leave and theoretically can't be called back to work at short notice.

So, the business must decide what benefit forcing or allowing annual leave during furlough will bring. Can it afford to top up salaries to do so? What does it gain or lose in relationships with its furloughed employees? How does the employee feel about being required to use annual leave at this time?

I'll leave you with these thoughts. If you practically can, what harm does it do to leave your employees to accrue leave over this period? How many days do you think this will amount to? Given that the Government has temporarily allowed statutory leave to be carried forward for the next 2 years you have the opportunity to spread the pain, the benefit to your staff is significant and you will be rewarded with happier employees when they come back.