UK: 02/12/2020 Christmas Furlough HMRC Update

Last night 1 December, HMRC issued a number of amendments to their on-line documents relating to furlough, mainly to remove out of date information relating to the scheme prior to 1 November.

Last night 1 December, HMRC issued a number of amendments to their on-line documents relating to furlough, mainly to remove out of date information relating to the scheme prior to 1 November.

However, an important change is under the ‘Holiday pay’ section of this document  and addresses an issue that has been of much discussion recently which are concerns that the new system is open to abuse – which is companies ‘furloughing’ employees just because they are on holiday when they would not be working anyway.

Although employers would have to ensure that employees are paid full pay for days on holiday, if they furloughed an employee they would still be able to claim the grant of up to £577 a week (£2,500 a month) from HMRC.

We are all aware that the scheme has already cost millions of pounds in claims made that were fraudulent and the first court appearance has taken place, and no doubt many more to come.

The last guidance made it clear that employees should not be furloughed just because they are on holiday, but the latest guidance goes further and specifically addresses Christmas. This makes it clear not only that the scheme is only available to those whose business is affected by coronavirus but it should not be used just because employees are on annual leave or you will do less work over the festive season which may be the normal operational situation over the Christmas/New Year period.

Not only will HMRC be checking for a sudden influx of claims of a week over the Christmas break, but they will be publishing details of all employers using the scheme from 1 December, so employees will also be checking to see if a claim has been made without their knowledge, and it appears that employees who are miffed to have found that their employer has claimed for the furlough grant whilst expecting them to work, or even worse they are not even aware that their employer is claiming the grant for them WILL and ARE coming forward to HMRC to report their employer.

The update says;

Holiday pay

Furloughed employees continue to accrue leave as per their employment contract.

You can only place employees on furlough if coronavirus (COVID-19) is affecting your operations.

You should not place employees on furlough just because:

  • they are going to be on paid leave
  • you usually do less business over the festive period

The employer and employee can agree to vary holiday entitlement as part of the furlough agreement, however almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below.

Employees can take holiday whilst on furlough. If they are flexibly furloughed then any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours.

Working Time Regulations (WTR) require holiday pay to be paid at the employee’s normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received by the employee in the last 52 working weeks (twelve weeks in Northern Ireland). Therefore, if a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations.

Employers will be obliged to pay employees who are on holiday additional amounts over the grant, though will have the flexibility to restrict when leave can be taken if there is a business need and the correct notice is given. This applies for both the furlough period and the recovery period.

If an employee usually works bank holidays then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave then the employer would either have to top up their usual holiday pay, or give the employee a day of holiday in lieu.

As always the team at Black Mountain are on hand to provide any further advice/guidance.

Black Mountain Group

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