Can an employee take annual leave while on furlough?

Government guidance on Holiday entitlement and pay during coronavirus (COVID-19) confirms that furloughed employees can take annual leave, without the furlough period being disrupted.

Employers must pay furloughed employees their normal rate of pay for a period of holiday, rather than any reduced amount they receive during the furlough. They must top up the amount they can claim under the Coronavirus Job Retention Scheme.

From 1 July 2020, furloughed employees can work on a flexible, part-time basis for their employer (known as flexible furlough). The employer can claim under the Coronavirus Job Retention Scheme for the hours that the employee does not work and is recorded as being on furlough. HM Revenue and Customs guidance on the scheme states that, where an employee is flexibly furloughed, "any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours". It goes on to say that employers should not place an employee on furlough simply because they are on holiday for that period. Therefore, an employer's decision about whether or not to furlough an employee should not be influenced by any annual leave, but if an employee takes annual leave during a period covered by a flexible furlough arrangement, the employer should record any hours they were due to work as furlough. It can claim for these hours under the scheme, ensuring that it pays the employee their normal rate of pay for the annual leave.

Many employers that have furloughed employees will not be in a financial position to pay them in full during annual leave. These employers can refuse any requests for annual leave during the furlough period by giving the required notice. Employees will be able to carry over unused leave in some circumstances (see When can annual leave be carried over due to the coronavirus crisis?).

Where an employer can afford to top up the pay of a furloughed employee, it may consider requiring them to take annual leave during the period of furlough. Whether or not this can be done in compliance with the Working Time Regulations 1998 (SI 1998/1833) remains uncertain (see Can an employer require employees to use their annual leave during the coronavirus outbreak?).