Unused Holiday Pay: What is the law?

Employees will clock up days they can use as annual leave, which should be accompanied with the correct pay and benefits.

Your staff may choose to take holiday leave or save them, especially if they could carry them over to the following year.

Whilst there isn’t a specific law for untaken holiday entitlements, you must still provide statutory holiday rights.

If an employee raises a claim for missing legal entitlements, you could face costly tribunal fees, workplace disruption, and impacts on your business.

In this guide, discover what unused holiday pay is, how to manage saved holiday leave, and which employees are entitled to holiday entitlements.

Can you be paid for untaken holidays in the UK?

Sometimes, employees might decide not to use their holiday leave days. This might be because they’re collecting them to use all in one go; or they’re too busy to use them.

Whether they use them or not, statutory holiday entitlement still applies. Unused or untaken holiday pay revolve around the amount of holiday accrual employees have.

Employees must take their holiday within a reasonable period for you, not the other way round. There is no law on agreeing to their dates; it falls to your discretion.

Do employers have to pay untaken holidays?

There’s no specific law on paying employees for untaken holiday.

Under the Working Time Regulations 1998, employees are legally entitled to a minimum of 5.6 weeks of paid holiday each year. This is around 28 days annually and includes Bank Holidays.

Paying for untaken holidays only occur through specific circumstances, like if they left their job.

Here, you must pay your staff for any untaken statutory leave, or payment in lieu. This counts even if it relates to dismissal for gross misconduct. If the leave adds up to more than 5.6 weeks of annual leave, consider separate terms for the extra leave period.

When you leave a job, do you get holiday pay?

All holiday allowance an employee has accrued must be paid before they leave their job.
This counts for all leave, but you only owe them what they haven’t used.

However, you should check your contract terms on holiday pay on termination of employment
beforehand. Some terms might state employees must spend their holidays during their working notice.

Employees claiming unpaid holiday pay are entitled to 1/12th of their holiday entitlement. If they’ve used additional leave, they might have to pay back it back. But you should check their employment contract terms.

Can you request holiday leave during a notice period?

In some cases, employees might request holiday leave if they decide to stop working for you. They might want to leave earlier – through holiday leave – instead of working through a notice period.

Decide whether their request for leave is compatible for your business needs. If it’s reasonable and follows your leave policy terms, you can grant them holiday leave.

However, you still must provide payment in lieu; and any holiday entitlements accrued up to the end of their employment must be granted.

Ultimately, it is up to you to provide the leave or not. Sometimes, it proves cost-worthy to grant holiday leave than pay wages during a notice period.

Can you force employees to use their saved holidays?

Employers can force their staff to use their holidays, but only if reasonable notice is given. You might enforce it to protect your staff’s welfare, preventing work-related stress or overworking.

But whilst you strive for their wellbeing, there are some holiday leave rules you should follow.

When requesting your staff to take leave, you must provide notice twice as the length of the holiday leave period. For example, if they have 20 days of holiday leave saved, you can request they take it 40 days before your given notice.

It’s also wise not to enforce a ‘use it or lose it’ culture in your business. It can negatively impact your staff’s working attitude and morale.

Can you carry unused annual leave into the next holiday year?

This depends on specific situations. But statutory holiday entitlements must be taken during the current holiday year.

There are exceptions to these rules; if they are ill, pregnant, or on maternity leave. Or if the current work year makes it impossible to take the leave before the year ends.

If an employee isn’t able to take leave due to having COVID-19, this also counts as an exception.

If these don’t apply, the right to carry unused holiday is limited. Employees are allowed to carry it forward for a maximum of 18 months after the end of the year.

Get expert guidance on unused holiday pay with Peninsula

Dealing with the legalities for holiday pay, leave, and entitlements can prove difficult.

But without caution, you could risk unfair treatment towards your staff. Employee resignations and unfair dismissal claims could be raised – meaning your business could risk facing costly legal fees at employment tribunals.

Let Peninsula answer the important questions, like “can I be paid for holidays not taken this year?” Or “am I still entitled to holiday pay if I decide to quit?”
Peninsula Business Services provides 24-hour HR advice and can help ensure you are compliant when dealing with leave and pay entitlement. You can also download our free annual leave and holiday pay guide for further information.

Get in touch today; or use our callback form to arrange for us to get in touch at a time that is convenient for you. Call us on 0800 028 2420