How to manage furlough and holiday accrual at Christmas

Helena Rosenstein explores what employers can and can’t do if their business slows or shuts down over the festive season

The extended job retention scheme – which will be in place until 31 March 2021 – is slightly more complex than the original scheme. Workers can now be on full or flexi-furlough and it has also reverted to the original governmental contribution of 80 per cent of wages for hours not worked (capped at £2,500 per month). 

The guidance makes it clear that workers continue to accrue holiday in the normal way and that they can take holiday while on furlough without interrupting that furlough period. Having said that, holiday must be paid at the worker's pre-furlough rate and so will incur some cost to the employer, which cannot be claimed for. 

Nevertheless, the furlough contribution could seem attractive to employers that might be slowing or shutting down over the festive period, making it tempting to place some or all of their workers on temporary furlough for that time so that they can recover 80 per cent of the holiday costs. However, it is clear from the guidance that it is not permitted to place workers on furlough if they are only being put on furlough to take holiday, or the employer usually does less business over the festive period (ie, the slowdown or shutdown is not related to the pandemic). 

Unfortunately, the guidance does not address the situation where the slowdown is worse this year, or where an employer is not in a position to weather a seasonal slowdown, as a result of the cumulative effects of Covid on their business. In these cases, it would be up to the individual employer to consider whether they can legitimately furlough their workers in the usual way. 

If the worker is genuinely already on furlough and the employer would like them to take holiday during the festive period; for example, to minimise excessive accrual that could cause disruption if and when business picks up, it is possible for the employer to insist on holiday being taken at this time. 

The usual caveats apply. The first is if there is a provision in the employment contract to allow employers to tell their staff when to take holiday, including during a slowdown or shutdown. If so, then they can exercise this right as per the contract. And if there is no such provision, the employer may direct their worker when to take holiday if they give them double the amount of notice as the amount of holiday that they would like the worker to take (though this timeframe can be varied if the worker agrees). 

Regardless, the Covid context means that some workers may argue that because they can't really go anywhere or see anyone outside their bubble, they will not enjoy genuine leisure time, which breaches the spirit of the legislation. The strength of these arguments will depend on the worker's situation at the time. This will include whether they have Covid or are self-isolating, as holiday can legitimately be postponed during periods of actual sickness but not necessarily during periods of self-isolation, and where they are in the UK as the lockdown rules and Covid prevalence varies so widely and can change very quickly. 

Employers should consider their workers' specific circumstances, so they can confidently insist on the holiday being taken or decide, for example, to build up some goodwill by gifting additional days to workers who are likely to be stressed and anxious – and who may well return to work more motivated and engaged as a result. 

Helena Rosenstein is a senior solicitor in the employment team at Blake Morgan