Your staff work hard. That's why it's important for them to take time off to recharge and destress. Unfortunately, it's not always possible for staff to take their full statutory holiday entitlement due to business commitments such as busy working periods. However, they should always be giving the chance to take their leave.
If this is the case, staff may ask to carry over some of their annual leave into next year's entitlement. While this may seem like a great solution, it will often depend on your company's policies and circumstances.
In this guide we will look at if leave can be carried forward, your legal responsibility as an employer, and what is best practice when managing holiday requests.
What is annual leave?
Annual leave is paid holiday that is granted to all workers in the UK. It is a legal right from day one of employment, under the Working Time Regulations (1998).
Annual leave is a legal right for:
- Agency workers
- Workers with irregular hours
- Workers on zero hour contracts
- Part-time employees
Employers can choose to provide workers with additional days of holiday entitlement on top of the statutory allowance. This is a benefit that employers may provide to improve employee satisfaction and is not a legal right.
All extra holiday allowances must be outlined within your employment contract and annual leave policy.
What is a 'leave year'?
A 'leave year' is the dates in which an employee can take their holiday entitlement. Employers should let an employee know the dates of their leave year as soon as they begin working with them.
The start and end date of leave years are dependent on an employer's preference. For example, they may run from 1 January to 31 December.
If the start and end dates of a leave year are not set out in an employee's contract, the start date will automatically fall on the first day of employment.
What is the legal statutory entitlement?
In the UK, employees that work a 5-day week, are legally entitled to a minimum of 28 days - or 5.6 weeks of paid holiday per 'leave year'.
Part-time workers are also entitled to at least 5.6 weeks of paid holiday, but this will amount to fewer than 28 days of paid annual leave. This is because paid holiday for part-time employees is calculated on a pro rata approach.
For example, if an employee works 3 days a week, they must get at least 16.8 days of holiday per leave year (3 x 5.6 weeks = 16.8).
Depending on what is outlined in the employee's employment contract, a worker's annual leave may include bank holidays.
Annual leave for workers with irregular hours
Employees that work irregular hours are still entitled to paid time off for every hour that they work. If they work a part-year (not every work week),they still receive the full 5.6 weeks annual leave.
You can calculate their entitlement based on the average number of hours they work per week. The usual rules for calculating the average is based on a period of 17 working weeks (this is know as the reference period).
What does it mean to carry over annual leave?
If an employee doesn't use all their annual leave in the given leave year, then they may lose it.
There is no automatic legal right to carry over annual leave. However, some employers do allow their staff to carry over a certain amount of unused annual leave into the next year.
How many days leave can employees carry forward?
The amount of leave that can be carried forward will depends on an employee's contract. Government guidance states that a worker who receives 28 days' leave per year, should be able to carry over a maximum of eight days.
These extra days can then be added to their next year. The same standard rules will apply when staff request to take leave. This means that approval will be subject to a manager's decision.
Employers will usually place a limit on the amount of annual leave that can be 'carried forward' per leave year. This should be outlined in your annual leave policy in your employee handbook.
How do employees accrue annual leave?
Employees begin to accrue annual leave from their first day of employment. They will also accrue annual leave while on maternity leave, paternity leave, adoption leave, shared parental leave or any other type of statutory leave.
Employers can use an accrual system to calculate an employee's leave entitlement. This can calculate leave for employees in their first year of employment. Or those that join an organisation part way through the 'leave year'.
Under this system, a worker will receive one-twelfth of their leave each month. For example, after three months in a job, a full time employee will be entitled to 7 days' leave (28 days ÷ 12 × 3).
When can workers take carried over leave?
When employees want to take their carried over leave, they must submit a leave request using their usual company procedure. This is typically done in writing or via HR software.
While you may wish that you could grant your employees leave whenever they need it, this isn't always practicable. Staff shortages or a significant increase in demand may mean that your workers are unable to take time off at certain times of year.
You can ask staff to rearrange their holiday for a later date to accommodate the rest of your available workforce. But if this isn't possible, they may end the leave year with unused annual leave and holiday days.
Do you have to pay staff for carried over annual leave?
Any annual leave entitlement that is carried forward should be treated the same as regular statutory annual leave.
This means that you will still need to pay workers for any carried over holiday.
When do you have to let employees carry forward leave?
There are some instances when an employer must allow staff to carry up to four weeks of holiday entitlement over into the next leave year. This happens when:
- A worker is unable to take their leave entitlement due to staff shortages, or if it was reasonably practical for them to take their leave.
- An employee has been on a period of statutory leave (usually sick leave, maternity or adoption leave etc.)
These rules only apply to the first four weeks of statutory holiday entitlement. The remaining 1.6 weeks, or any other additional contractual annual leave can only be carried over into next year at the employer's discretion.
Benefits to allowing staff to carry over annual leave
There are many benefits to allowing staff to carry forward their holiday allowance
Allowing staff to carry over remaining annual leave can help you manage staff shortages and ease pressure during a busy working time. Many employers face busy periods at the end of the year. This isn't helped by employees wanting to use their remaining holiday entitlement before they lose it.
If a majority of your staff are away at the same time you may need to provide cover or use agency workers. This can be costly and time consuming. Allowing staff to carry over their annual leave entitlement can help prevent any bottle necking. This can help ease staffing shortages and keep your business running smoothly.
What can you do to avoid staff carrying over holiday?
For some businesses, it may not be reasonably practicable to allow staff to carry over holiday and annual leave. Small businesses for example, may not be able to cope with managing an increasing number of holiday requests year-on-year.
There are a few alternative practical measures that you can put in place instead, such as a buy back scheme. A buy back scheme allows staff to sell their remaining annual leave back to their employer for additional pay. This can be paid monthly or as part of a yearly bonus at the end of the year.
Staff are only able to sell back additional days of leave and not their statutory leave entitlement.
Get help managing staff and carry over leave
As an employer, you never want your staff to feel stressed or over worked. That's why it's important to encourage staff to take their annual holiday entitlement so that they can refresh and recharge.
However, it isn't always reasonably practicable to allow annual leave during busy time periods. This can mean that staff can miss out on their holiday allowance leaving them rundown and overworked.
Peninsula team of experts are here to help you write an airtight annual leave policy. Our 24/7 HR advice and support can answer all your employment law questions. Contact us on 0800 029 4376.