Supporting Fairness, Clarity, and Wellbeing in Leave Management
Managing employee holidays can be complex, especially when they overlap with other types of leave. This guide is designed to help you navigate holiday accruals with confidence and care, ensuring both compliance and fairness for everyone.
Keeping Track of Leave
Accurate record-keeping is essential. Many organisations use spreadsheets, but increasingly, HR and payroll systems are preferred for real-time tracking and integration with financial reporting.
Aligning your holiday year with your financial year can simplify reporting. At year-end, any unused accrued holiday must be included in your company accounts as a liability. We’ll ensure its correctly placed—just make sure your records are up to date.
Calculating Holiday Pay
All workers are legally entitled to 5.6 weeks of paid holiday per year (statutory leave entitlement). Employers may include bank holidays within this entitlement or offer them in addition.
Part-time employees are entitled to the same amount of holiday on a pro-rata basis.
Use the official GOV.UK calculator to work out entitlements
Holiday Accrual
Holiday begins to accrue from the first day of employment, building up monthly in proportion to the annual entitlement.
Example:
A full-time employee in their ninth month of employment will have accrued 9/12ths of their annual entitlement.
If the full entitlement is 28 days:
28 × 9/12 = 21 days accrued
During Sick Leave
Employees continue to accrue holiday while on sick leave. If they’re unable to take their holiday due to illness, they must be allowed to carry it over into the next holiday year.
Under current legislation, up to four weeks of unused leave can be carried forward for up to 18 months.
Company Closures
Employers may decide when leave is taken, such as during a company-wide closure (e.g. over Christmas and New Year). This should be communicated clearly and fairly.
Offering More Than the Minimum
Employers may offer more leave than the legal minimum. For any additional contractual leave, you can set your own rules—for example, requiring a certain length of service before entitlement begins.
Maternity, Paternity & Parental Leave
Employees continue to accrue both statutory and contractual holiday during maternity, paternity, and shared parental leave.Holiday cannot be taken during these leave periods, but it can be added to the beginning or end of the leave with mutual agreement.
Holiday Pay for Irregular Hours and Part-Year Workers (2024 Reform)
From April 2024, new rules apply:
- Rolled-up holiday pay is now permitted, allowing holiday pay to be included in regular wages (must be itemised on payslips).
- For casual and part-year workers, holiday entitlement may be calculated using the 12.07% method, based on hours worked.
Employers must ensure contracts and payroll systems reflect these changes.
When Employment Ends
Employees are entitled to payment for any unused accrued holiday when they leave.
If they’ve taken more leave than they’ve accrued, your employment contract may allow for repayment of the excess, provided this is clearly stated.
Best Practice Reminders
- Review employment contracts annually to ensure they reflect current legislation.
- Use digital systems for tracking leave and integrating with payroll.
- Communicate leave policies clearly to all staff, especially around carry-over and company closures.