Holiday accrual guide

  • Leave and Absence
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Peninsula Group, HR and Health & Safety Experts

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Your business can use a holiday accrual system with staff in their first year of employment with you. Find out if this is a suitable option for your business.

It’s not uncommon for some businesses to run an accrual system as part of their annual leave process. Is your business looking to use this system, or refine what you currently have in place? Well, this guide explains the right procedures to adopt.

Accrued annual leave meaning

The term means holiday entitlement that's developed over the first year of an employee's work history with you. In other words, employees start to accumulate more holiday time. It’s up to you to decide whether they can carry over untaken leave days into each given holiday year. You’ll also need to know the holiday pay accrued meaning, which basically means the amount of entitled paid time off any given employee can claim.

How much accrual can employees claim?

Your staff can claim up to 5.6 holiday accrual per week of holiday pay accrual leave per year, although you may choose to offer more if you wish. So holidays accrued per month means the staff member builds up their accrued holiday entitlement during their leave year. Their entitlement starts to build up, or accrue, from the first day of employment. It’ll accrue at the rate of one-twelfth of the year’s entitlement at the start of each month. This is important during the first year of employment. Only the amount of leave accrued by an employee is claimable. In subsequent years, this restriction doesn’t apply.

What happens to accrued holidays on contract termination?

Calculating holiday days accrued is important on termination of employment. You must work out whether the employee has taken more leave than they have built up at the point of termination. If so, and if the contract of employment allows for this, the employer may recoup wages equal to the amount of leave which has been overtaken. Similarly, if the amount of leave taken is less than that built, you’ll owe the employee wages equal to the amount of leave built up but not taken.

Accruing holiday on maternity leave

Maternity holiday accrual of annual leave doesn’t always require the employee to be working. For example, it’ll continue to accrue during periods of maternity leave. Holiday accrual during maternity leave can create a tricky situation for employers. If an employee is on for a full 12 months, they'll have accrued annual leave for maternity of a full year’s worth of annual leave. They can't take it at the same time as maternity leave. You should agree with the employee how they want to take the leave accrued. An example is taking a block of leave before maternity leave starts. Or tagging a block on to the end and allowing the employee to take any remaining leave in the following leave year (along with the leave accrued in that year, too).

What about holiday funds?

Holiday fund accrued is a process that covers the costs of a staff member’s time away. A different option is a holiday scheme, which gathers days available that a staff member can then take as a holiday. If an employee wants to take their annual built up holidays only a short way through a working year, then a business can pay more holiday fund than necessary. This then leaves a negative amount to make up at a later date.

Accrual of annual leave during sick leave

Annual leave will also accrue while an employee is on sickness absence. The result will be similar to that arrived at with maternity leave. The employee will can take their built leave in the next leave year and sometimes beyond. However, the rules on taking annual leave built up during sickness absence are more complex. As a result, take specialist advice on each circumstance.

Need our help?

Our expert team ensures your annual leave policies are on point. Get in touch with for more advice on holiday leave accrual: 0800 028 2420.


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