The new flexible furlough scheme commenced on 1 July 2020, with many employers taking advantage of the ability to bring employees back to work on a part time basis as the country begins to ease out of lockdown.

On the 12 June the government published updated guidance regarding the details of the flexible scheme which will run until October 2020 and a third Treasury Direction was published on 26 June also addressing the changes.

Prior to 1 July the Government made it clear that it was possible for an employee to take holiday whilst on furlough and not only would this not break the furlough period, but the employee should be paid 100% of their wage whilst on holiday.

The Government has now addressed how holidays should be managed with the new flexible furlough scheme.

Principally, where an employee is flexibly furloughed, any holiday taken during the relevant claim period should be counted as furloughed hours rather than working hours. This means that an employee who is due to work on a part-time basis during a particular claim period should be treated as being on furlough for all holiday taken during that period – regardless of whether some or all of the holiday falls on days when they were otherwise due to work. The employer will be able to claim 80% of the employee’s pay for the whole of the holiday period through the Scheme, although it will have to top-up to full holiday pay.

Further, the guidance states that employers should not place employees on furlough leave simply because they are on holiday at that time. It is likely that this would be regarded as an abuse of the scheme.

Although not specifically expanded upon, it is thought that this means that an employer cannot deliberately move an employee on to furlough leave instead of work, or move an employee whose furlough period had finished back into the furlough scheme, because they have booked a holiday.

However, if the employee was already due to be working under the flexible furlough scheme, all holiday time during that period should be treated as furlough.

How this will be audited by HMRC moving forward remains unclear and many employers have been left unsure as to how best to address holidays whilst using the flexible furlough scheme. If you have any questions about the implications of the new guidance, please contact a member of our Employment Team.