Calculating statutory annual leave might seem straightforward enough but there are several factors that you should take into account as well as pitfalls to avoid.
With the summer holidays now just a memory for most of us, it might seem a little strange to be talking about annual leave as we approach winter. However, mishandling annual leave can have a huge impact on a business and it is vital for any employer to know how to calculate and manage leave entitlement for your employees.
From part time working, bank holidays and carrying holidays over to refusing a request and holidays accrued whilst on sick leave, this is an issue that is much more complex than would first appear and this is the ideal time of year to take a look at your own annual leave policy to make sure that it is up to date and fit for purpose before we start another calendar year.
All employers are required by law to give their employees a certain number of days holiday during the year and you must pay staff holiday pay while they are on annual leave. However, the amount of annual leave that employees are entitled to does depend on several factors.
Almost all workers are legally entitled to 5.6 weeks paid holiday per year (known as statutory leave entitlement or annual leave). An employer can include bank holidays as part of statutory annual leave.
Working 5 days a week
Most workers who work a 5 day week must receive at least 28 days paid annual leave per year. This is the equivalent of 5.6 weeks of holiday. The first 4 weeks are granted through the EU Working Time Directive and may have additional rules attached to them.
Part-time workers get less paid holiday than full-time workers. They’re entitled to at least 5.6 ‘weeks’ of paid holiday but this amounts to fewer than 28 days because they work fewer hours per week. A ‘week’ of annual leave is the same length as an employee’s normal working week, for example if they work 3 days a week, then their overall entitlement will be 3 x 5.6 or 16.8 days.
The maximum statutory entitlement is capped at 28 days, meaning that anyone working 6 days a week will only be entitled to the same 28 days as someone who works a 5 day week.
It is important to check for any contractual entitlement as well, as your company might allow an enhanced annual leave entitlement or may allow long serving employees to gain additional days depending on their length of service.
Bank holidays can be included in the 5.6 weeks entitlement. It is the employer’s choice whether to let employees have bank holidays off on top of their annual leave, or whether to let them have bank holidays off at all.
It is not a statutory requirement to get the bank holiday day off but where a bank holiday is worked, employers must ensure that the worker still gets 5.6 weeks of annual leave off during the leave year.
Carrying holidays over
An employee accrues holidays over the course of a leave year and usually must take them within the leave year in which they were acquired. It is the employer who should set when a leave year starts and ends. This could be a calendar or a financial year.
If the employee does not take all their holidays, they may lose them unless the employer agrees that some can be carried over. However, an entire year’s worth of leave entitlement cannot be carried over, as the 4 weeks granted by EU law must be taken in the leave year in which it is accrued.
However, the remaining 1.6 week entitlement can be transferred to the next leave year, subject to agreement. This would equate to 8 days for a 28 day entitlement.
Annual leave accrued whilst on sick or family friendly leave
If an employee is on sick leave or another type of statutory leave (such as maternity leave), which makes them unable to take their holiday entitlement in the leave year, they must then be allowed to carry some of it over to the next year’s leave.
With sick leave, the employer needs only to allow them to carry 4 weeks over. With maternity leave, the employer must allow the employee to carry over the whole amount.
*Case law means that if an employee does not take their annual leave during their sick leave, they are still entitled to take it for up to 18 months from the end of the leave year in which it was accrued.
What if staff are sick during annual leave
If an employee is sick during annual leave, there is nothing in theory to prevent them from taking their holiday entitlement when they are sick.
Employees do not have a legal right to cancel their holiday request to take sick leave. However, if the employee was genuinely sick and they have provided you with notification and evidence, then you may treat the time off as sick leave. This is because if they have been ill during time off, then they may not have had the break from work that they may have needed.
Refusing a request
Rules for requesting annual leave are at the employer’s discretion and should be included in your annual leave policy. The policy should set out the procedure for making a request, notification requirements and can even set a cap on the number of staff who can be off at the same time.
Even if you do not have this policy, you are still able refuse requests if you cannot accommodate them. But to do this, you will need to give the employee counter notice in writing (as least as many day’s notice as the leave that has been requested) that they cannot take annual leave on that particular day.
When you are refusing an annual leave request, you must be certain that you have done so fairly and that you haven’t discriminated against the employee.
Imposing a period of holiday
Some companies choose to have a period of annual shutdown, for example at Christmas or during wet months if their work is dependent on dry weather conditions.
Therefore, you may wish to enforce a period of holiday and you can do so as long as you give at least twice as much notice as the length of the leave. For example, one week of imposed holiday would require 2 weeks’ notice. You can also impose a period of holiday at different times for different employees to ensure that annual leave is spread out and there are enough people to cover any busy periods.
The end of a contract
When a contract of employment ends, employees may not have taken all of the holidays that they have accrued in that leave year. Annual leave entitlement cannot be substituted by payment in lieu of this, the only exception to this being where the employee’s contract comes to an end.
If an employee does not receive pay for any accrued but untaken holidays, they can make a claim for unlawful deductions from wages. When working out the payment, remember that if the employee is working their notice, annual leave will continue to accrue during this period.
If an employee leaves you in the middle of a leave year having taken more holiday than they have accrued at the time of their termination, then you can deduct this from their final salary provided that the contract of employment includes a clause which states this.
As you will see, annual leave is much more complex than it may at first appear and there are common pitfalls which you should be aware of as an employer. Please do get in touch with me if you need help with managing your own annual leave policy.