How Much Holiday Should You Give? Holiday Entitlement (UK)

Leave entitlement is statutory - as an employer, you have to pay a certain amount of holiday per year.

Calculating entitlement is not always easy. Balancing business needs and ensuring that the statutory rights of the employees are met can be a challenge, especially if you haven't got the right policy and calculations in place.

In this article we will look at the statutory leave entitlement that each employee is allowed, and how to calculate it for different types of workers. We will also look at how entitlement can be allocated, and whether you should carry unused leave over or pay it instead. This will give you a good overview of the best way to word your own leave policy to cover different situations.

What is holiday entitlement in the UK?

There is a certain amount of holiday or leave that every employee in the UK is entitled to. This is built into employment law, and is made up of regulations from the EU as well as from the UK.

Leave entitlement states that any employee is entitled to paid holiday, based on the amount of hours that they work. Holiday entitlement applies to full-time and part-time employees, as well as those on zero-hour contracts and those that work irregular shifts, such as term-time employees.

Employers have to ensure that they provide a robust policy for leave to ensure that they are meeting their responsibilities to their employees.

Why is holiday entitlement important?

The statutory leave entitlement is important for employers and HR managers to understand so that it can be planned for when looking at things like minimum staffing and ensuring coverage for busy periods in the business.

28 days of leave for a full-time employee, which has to be paid at the normal rate, can become a tricky thing to manage if all employees are taking the same time off.

However, not allowing employees to take their leave entitlement when they ask can have consequences that include:

• Poor morale

• Risk of burnout

• Increased absenteeism

Employers who do not offer at least the minimum entitlement to leave for their employees are leaving themselves open to legal challenges on top of productivity and culture-related issues.

Statutory holiday entitlement in the UK

The statutory leave entitlement for workers in the UK is made up of four weeks that are built into EU employment law, and an extra 1.6 weeks that is added from UK law, making a total of 5.6 weeks.

For a full-time employee working five days a week, this works out to 28 days per year.

Bank or public holidays can be included in the statutory leave entitlement.

While 28 days is the statutory leave entitlement, employers are able to offer extra holiday as an additional paid leave to create a more attractive benefits package for recruitment and retention.

Part-time workers and those that work irregular hours or for only part of the year are still entitled to 5.6 weeks of their usual working pattern, which will be less than the 28 days offered to full-time employees on a pro-rata basis. People who work six days a week are still only entitled to 28 paid days under the statutory requirements.

Workers can accrue holiday while they are employed, even if they are absent from the business for reasons including sick leave, and family leave like maternity, paternity, or adoption.

If an employee starts their employment part of the way through a leave year, they need to be provided with a proportion of their full entitlement to leave relative to the amount of time that they have worked.

The other thing for HR and employers to be aware of is that if there is a fraction of the day that is allocated as leave, it is not allowed to be rounded down. This means an employee that has 0.2 days of leave can either come in late or finish early on a particular day, or the leave can be rounded up to a full day.

Statutory holiday entitlement: how to calculate it

The calculation for statutory leave entitlement is relatively simple - just multiply the number of days worked in a week by 5.6.

An employee that works 5 days a week will get 28 days of statutory leave: 5 x 5.6 = 28.

An employee that works 3 days a week will get 16.8 days statutory leave: 3 x 5.6 = 16.8.

There is a calculator provided by the government that makes the calculation for you, if you need it. It can be found on the HMRC website.

You can also work out the amount of holiday an employee is entitled to based on the number of hours that they usually work in a week using this calculator.

Additional holiday entitlement

Employers are able to add discretionary leave to the statutory amount given by law. This is known as additional leave, and it is up to the business to decide whether to offer extra leave, and how much to offer.

HR and the recruitment team might set up additional leave as part of the benefits package when they are recruiting.

Additional leave can be used as an incentive for hitting targets, much like a bonus payment.

In some cases, additional leave can be offered to those who have stayed with the company for a certain length of time; this usually looks like an additional day for every year after three or five years, for example.

Additional holiday entitlement might also be offered in the form of adding bank holidays on top. The statutory leave policy required by the government does not state whether it has to include public holidays in the 5.6 weeks, so this is something that can be simply added to the entitlement should the business want to.

Additional holiday entitlement: how to calculate it

The way your business calculates additional holiday entitlement will depend on the type of additional entitlement that is being offered.

In essence, the most important thing to consider is that it should be calculated fairly for all employees, taking into account the way it is accrued.

You can simply add the days to the entitlement on a similar basis to the statutory leave entitlement, with the same proportional calculation for part-time workers.

Accrual of holiday entitlement

There are two main ways that holiday leave can be applied to employees.

Firstly, you can give each employee their entire allocation at the beginning of the leave year. This can run from 1st January to 31st December, or any other full year. The employee can choose when to take their allowance throughout this period.

The other way is to have leave entitlement accrue according to the time worked.

Employees begin to accrue their leave entitlement as soon as they start working for a business. With the accrual system, you can work out that your employees would earn a twelfth of their entitlement for every full month worked. If they start working for the business part way through the leave year, then you will need to work out their entitlement based on the number of months that they will have worked in the remaining year.

You will need to ensure that your leave policy includes details including when the leave year begins and ends, and how the accrual will work.

Accrual of holiday entitlement: how to calculate it

Calculating holiday accrual is quite simple.

If a full-time employee has only the statutory amount of leave allocated to them in the year, the calculator is as follows:

28/12 = 2.3 days accrued for each month worked.

If the full-time employee started three months into the leave year, their total entitlement for the year would be a quarter less than the full equivalent.

28/12 = 2.3

2.3 x 9 = 21

The full-time employee in this case would have 21 days of leave in the year, that they would accrue at a rate of 1.75 days per month.

Creating a leave policy

Your leave policy needs to include explicit information about how leave is accrued, when it can be taken, and the process for getting leave requests accepted.

Some of the considerations you need to make when creating a leave policy:

• Does the statutory leave entitlement include bank holidays?

• What additional leave is allocated to each employee?

• How do workers accrue additional leave? Is it through long service?

• Can unused leave be carried forward? If so, how much?

• When can leave be taken?

• Are there periods where leave cannot be taken?

• Is it possible to get paid for unused leave?

Carrying over and paying out holiday entitlement in the UK

According to the statutory leave regulations, employees are allowed to take eight days forward into the next leave year if they are allocated 28 days.

It is up to the business if they allow employees to carry forward more than that if the leave is unused in the year it is accrued.

Most leave policies will have a clause that annual leave has to be taken in the same year that it is accrued. This use it or lose it policy is something that needs to be built into the annual leave policy so that the employee is aware that they have to take their allocated leave or risk losing it completely.

To be able to use this policy, the HR team needs to ensure that the worker is given the opportunity to take time off and encouraged to do so, and that they are informed that they would lose their leave if it is not taken.

Not allowing employees to carry over their leave can make a significant saving in terms of cost, and helps to maintain staffing levels.

However, this is not always the best policy for dealing with unused leave.

Firstly, for the employees this can be damaging to morale, and not having enough leave from work could cause problems with absenteeism and burnout. For the employer, the _use it or lose it _policy is likely to cause a large number of leave requests to come in at the end of the leave year, which can make it difficult to manage staffing levels and lead to operational challenges.

Alternatives to the use it or lose it policy

There are other ways that any unused leave can benefit employees without causing problems for employers.

Carrying over unused leave is a simple solution. A maximum of eight statutory days can be carried forward, and any additional leave at the employers discretion.

Make it clear in the leave policy how this will work in practice, and remember that it can be applied at business discretion and on a case-by-case basis.

Carrying over leave might have to happen if an employee has been unable to take their statutory leave because of something like long-term sick leave. In this case, the employer has to allow them to take up to 20 days extra into the next leave year.

The other option is to pay the holiday entitlement in lieu of leave being taken. There is no automatic right to this under employment law, unless the employment has been terminated without the full leave accrued being taken.

Payment in lieu of leave can be made for additional leave on top of statutory allowances, and it can be paid automatically if not taken or it can be decided on a discretionary basis.

Key takeaways

The management of holiday entitlement, including statutory and additional leave, is important not only to adhere to working time regulations set by the government, but also to ensure that workers are treated fairly and have an adequate balance between work and home life.

Monitoring the accrual of leave and ensuring that employees can take leave when they want to is something that is much easier with the relevant software, and it all has to be balanced with clear leave policies.