by Connor | Jun 09, 2020 | Accounting
Almost every worker in the UK is entitled to holiday pay. This includes people with regular fixed contracts, temporary workers, those working irregular hours and even casual workers on zero-hour contracts. The only people who are not entitled to holiday pay are self-employed workers. This article will cover Holiday Entitlement During COVID-19.
Most workers receive 5.6 weeks of paid holidays each year, which is calculated by taking 4 weeks from EU law and an additional 1.6 weeks from UK law. Some workers receive more holiday time, and this is known as contractual holiday entitlement.
But how does holiday pay work among furloughed workers? Can you still claim holiday pay right now – and more importantly, who pays? There’s some good news for employers. Read about it here.
Yes, workers who are currently furloughed are still entitled to take holidays. If this is the case, the worker will be paid in accordance with standard guidelines.
If you work fixed hours, this will be calculated by working out your weekly earnings. For those that do different shifts and unfixed hours, the average weekly salary over the last 52 weeks will be calculated using average hourly pay. Zero-hour workers’ holiday pay will be calculated using their average weekly pay only for weeks they have worked.
If one of your staff takes holidays while furloughed, the government furlough scheme will cover 80% – while the furlough scheme is still active. Any amount that the furlough scheme does not cover will be paid by the business.
A Simple Example:
For example, Jenny works in marketing and receives a monthly salary of £2,000. She is currently furloughed and receiving 80% of her monthly salary (£1600).
But Jenny decides to take her holiday entitlement for the next month while the furlough scheme is still active. Her employer grants her this entitlement. Jenny now receives 100% of her monthly salary (£2,000) because she works fixed hours at a fixed hourly wage.
The UK Government scheme will continue to pay 80% of Jenny’s monthly holiday pay (£1,600) while her employer will pay the remaining 20% (£400).
One change that employers and their staff need to be aware of is that the amount of accrued holiday entitlement can now be carried forward to the following years.
In most situations, only 1.6 weeks of holiday time can be carried to the following year (if an agreement between both employer and employee exists). The remaining four weeks cannot be carried forward unless there is a reason the employee cannot take their holidays, such as being off sick or on maternity leave.
These rules remain the same during COVID-19 – but there is now an additional reason why your staff could carry holiday entitlement forward.
If staff have not been able to take some or all of their four weeks holidays entitlement, new COVID-19 legislation states they have the right to carry these four weeks into the next two years if taking holidays was not reasonably practical. This temporary law change is also designed to help businesses become more flexible and retain staff when they may need them most.
To work out if taking holidays is not reasonably practical, various factors should be considered, such as:
If the business is experiencing increased demand due to COVID-19 and requires their staff to work to meet orders etc.
The feasibility of the employer being able to take their holiday pay later in the year
How leave would affect society’s response to COVID-19
The business cannot afford to pay the extra 20% holiday pay at this time
These are just some of the factors that may be considered. Interestingly, holiday pay can be carried forward if the business is financially struggling and not able to pay the difference between the government’s 80% furlough scheme and any remaining monies owed due to staff taking holidays (such as the £400 owed to Jenny in the example above).
If you are confused by the current rules regarding COVID-19, furlough schemes and what it means for you and your employees, do not hesitate to zip us a message or give us a call.
Our knowledgeable team at Yorkshire Accountancy is here to help you and your business!