Furlough can pay for annual leave!

Coronavirus Help | General Guidance | Rates of Pay • August 19, 2020

Furlough can pay for annual leave!

Written by Jennifer Ormond

Did you know that you can re-furlough an employee when they take annual leave?

This means that employers can reclaim up to 80% of the holiday pay.  If you have to pay it out, you may as well claim some of it back!  Our advice is to use the scheme for all it’s worth!  Why not?

The furlough scheme allows employers to recoup the following rate:

  • 80% (up to £2,200 a month) until 31 August;
  • 70% (up to £2187.50 a month) until 30 September;
  • 60% (up to £1,875 a month) until 31 October

There’s so much uncertainty at the moment in relation to going away on holiday that lots of employees are cancelling their annual leave.  Employers are facing a huge backlog of annual leave which needs to be used rather than carried over for up to two years (see our post here).  We recommend that employers force employees to take the annual leave and then re-furlough them to reclaim some of the holiday pay.

Here’s how:

Step 1: Confirm the annual leave

Employers can rely on an employee booking the leave.

Alternatively, employers can serve notice that annual leave has to be taken under regulation 15 of the Working Time Regs 1998.  Employers should serve double the duration of leave (for example 2 weeks notice of 1 weeks holiday) and confirm in writing: “This is a notice under Regulation 15 of the Working Time Regs 1998 that you are required to take [one week] annual leave between [date] and [date].”

Step 2: Re-furlough

If the employee had previously been furloughed for 3 consecutive weeks between March 1 and 30 June and the company submitted a claim to HMRC before 31 July, then the employee can be re-furloughed.  Please contact us for wording to give to the employee.

Step 3: Pay 100%

When the employee is on annual leave, they are entitled to be paid at 100% of their wage.

Step 4: Submit claim to HMRC

Claim back up to 80% of the pay (subject to the month which the furlough took place) through the Coronavirus Job Retention Scheme.

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