Annual Leave

Everyone needs a break from work every once in a while. You may want to travel, rest, or just want to spend quality time with friends and family.

As employers, you must ensure your staff receive their annual leave entitlements in the correct manner. Annual leave comes with specific legal rules and requirements. If you deny any, you could end up causing high employee disengagement, absenteeism, and turnover.

In this guide, we'll discuss what holiday leave is, how much holiday pay employees get, and what the legal minimum requirements are.

What is annual leave?

Annual leave is a period where employees are able to take paid time off from work.

According to the Working Time Regulations, certain employees are legally entitled to 5.6 weeks (or 28 days) of paid holiday leave per annual year.

This is the legal minimum amount according to UK law. Employees must be given holiday pay as part of their annual leave entitlement. It's good practice to outline statutory holiday entitlement in your employment contracts and company handbook.

Whilst employees are on annual leave, some legal rights still continue. For example, some employees are able to build up (‘accrue’) holiday entitlement during maternity leave.

How much are employees paid during annual leave?

Under UK law, there isn’t a set amount that employees are paid during annual leave.

This type of holiday allowance is given based on their individual employee status and eligibility criteria. Usually, an employee is paid their full basic rate for authorised absences taken as annual leave. Meaning, they’re paid the same as one normal workday.

This payment amount could also vary depending on their contractual terms. For example, their contract could state they’ll receive more holiday pay in comparison to their daily wage.

Do employees receive paid annual leave during public holidays?

Employees don’t have a legal right to be paid on public holidays; i.e., like Christmas or bank holidays.

It’s up to the employer to decide whether to pay their employees on public or bank holidays. If so, these terms must be included in their contract and agreed to. In the UK, there are eight general bank holidays per year:

• New Year's Day.
• Good Friday.
• Easter Monday.
• Early May Bank Holiday.
• Spring Bank holiday.
• Summer Bank holiday.
• Christmas Day.
• Boxing Day.

It’s also your decision whether employees should work on public holidays. This is quite a common practice in the retail and hospitality sector. Be aware that this could have negative impacts on employee morale and retention rates.

How to calculate holiday entitlement

Calculating holiday entitlement is best done by using an annual leave calculator. This helps work out how much a person will receive based on their employment status and statutory rights.

The simplest calculation for working out holiday entitlement is done by multiplying the number of workdays (per week) by 5.6. For example, if an employee works a five-day week, they would be entitled to 28 days annual leave.

But there are other considerations to look at when calculating holiday entitlement for your staff. For example:

Holiday accrual

Holiday accrual is when an employee accumulates paid annual leave on a monthly basis.

For full-time workers, this is typically 2.33 days per month. Employees that join a company halfway through a holiday year are entitled to half their annual holiday entitlement. If they take more than they’re allowed, they may be legally obliged to pay it back.

Holiday day accrual also covers other forms of absence. For example:

• Garden leave.
• Suspension.
• Disciplinary investigations or disciplinary procedure.
• Maternity, paternity, and parental leave.

Employee status

Certain workers or part-time employees will have different holiday entitlements compared to full-time staff.

To calculate paid holidays for part-time workers, you need to base it on how many days they’ve worked. They should still receive 5.6 weeks of paid holiday, but it’ll derive from fewer working days.

For example, if a part-time worker works three days a week, they’ll get 16.8 days of leave (3x5.6).

It’s best to use a holiday entitlement calculator to work this out, as part-time workers will usually have individual workdays clocked up. It’ll vary for shift workers, zero hour contract workers, and agency workers.

Parental leave entitlement

Some employees will be entitled to parental leave and certain paid leave entitlement. Employers may need to calculate this amount based on what type of parental leave they’re on. For example:

• Maternity leave.
• Paternity leave.
• Adoption leave.
• Shared parental leave.

How to manage annual leave requests

It’s important for employers to deal with all annual leaver requests in the proper way. If you neglect this, you could end up breaching statutory rights.

Make sure you know how many holidays your staff are entitled to, how much they should be paid, and how to cover their absence in the workplace.

Let’s take a look at how to manage annual leave requests:

Introduce an annual leave policy

The first step employers should take is introducing an annual leave policy.

These are guidelines that cover the rules on taking annual leave – for employees and the business. Your annual leave policy should include:

• How to request annual leave
• Who approves these requests.
• How much notice period is needed (if applicable).
• How to make multiple annual leave requests.

Your annual leave policy must not discriminate against any employee. Some employees may need to take leave due to family commitments or health issues (especially if they’re run out of sick days). Be reasonable and understanding when it comes to continuous requests.

Use holiday management software

The best way to keep on top of annual leave requests is to use holiday management software.

Going digital helps minimise the risk of human errors, deal with logging data, and pass approval (or decline) decisions. The software also helps employers plan ahead with less staff – helping to minimise lost output and business disruptions.

Holiday management software can also automatically send out holiday pay entitlements, too. Meaning, it gives you one less thing to worry about.

Keep an open line of communication

In some cases, an employee might take annual leave for unfortunate reasons. They could be using them to rest after a serious injury or taking extended bereavement leave.

Keep an open line of communication and be supportive during troubling times. This doesn’t mean contacting them every day that they’re off. Aim to maintain regular, respectful contact and assure them that you’re always available if and when needed.

It’s always best to have a meeting with them when they’re ready to come back. This helps you evaluate if they’re ready to work again, or whether they might need more time off to recover.

Get expert advice on annual leave with Peninsula

When employees take holiday leave, it allows them to rest, recharge, and return fighting-fit.

Sure, you may need to deal with losing staff for a couple of days or weeks. But you gain happy, engaged, and content employees when they return from leave. If you deny annual leave rights, you could end up causing high employee disengagement, absenteeism, and turnover.

Peninsula offers expert advice on annual leave. Our teams offer 24/7 HR advice which is available 365 days a year. We take care of everything when you work with our HR experts.

Want to find out more? Contact us on 0800 029 4377 and book a free consultation with an HR consultant today.