Furlough and annual leave: Does annual leave accrue during furlough?

Chancellor Rishi Sunak introduced the Coronavirus Job Retention Scheme last month, giving struggling employers the opportunity to put staff on furlough for up to three months as the COVID-19 crisis continues in the UK. The scheme lets your employer claim a grant for 80 percent of your regular wages up to a cap of £2500 a month.

Does annual leave accrue during furlough?

Statutory annual leave will continue to accrue as normal during a period of lay-off or furlough during the coronavirus crisis.

This is because the contract of employment will continue to be in existence during this period.

Contractual annual leave in excess of the statutory minimum will also continue to accrue unless the contract specifically provides otherwise.


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Speaking to Express.co.uk, Claire Woolf, Managing Editor and Lawyer at Sparqa Legal, explained your rights while on furlough.

She said: “The Government has confirmed that employment rights and benefits continue whilst on furlough, including the right to SSP, maternity and other parental rights, rights against unfair dismissal and rights to redundancy payments.

“Annual leave has not been specifically mentioned, but it seems clear that this would continue to accrue.

“However, whether or not staff can take annual leave whilst on furlough – and what they ought to be paid whilst on leave – has not yet been clarified.”

HMRC’s guidance does not currently expressly deal with annual leave.

However, it does state: “Employees that have been furloughed have the same rights as they did previously.”

This will presumably include entitlement to accrue annual leave in accordance with their contract.

To the extent that an employee’s contractual annual leave entitlement exceeds the minimum statutory entitlement of 5.6 weeks, it may be possible to agree the employee will “waive” their enhanced entitlement in exchange for their pay being “topped-up” during the period of furlough leave.

In addition, it may be possible to agree with staff the waiver of other contractual benefits, but this will involve a change of contractual terms.

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What is furlough?

Furlough leave is a temporary leave of absence for economic reasons and is designed to save jobs and currently, it is a claim for your employees’ wages through the Government’s Coronavirus Job Retention Scheme.

The scheme is to help you if you cannot maintain your current workforce because your operations have been severely affected by coronavirus.

Employers can furlough employees and apply for a grant that covers 80 percent of their usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and pension contributions on that subsidised furlough pay.

The scheme is temporarily and in place for three months starting from March 1, 2020.

Who can claim furlough?

You must have:

  • created and started a PAYE payroll scheme on or before February 28, 2020
  • enrolled for PAYE online – this can take up to 10 days
  • a UK bank account

Any entity with a UK payroll can apply, including businesses, charities, recruitment agencies and public authorities.

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