Know how much holiday to give your staff

Most workers are legally entitled to paid holidays/annual leave.

A worker’s statutory paid holiday entitlement is 5.6 weeks (28 days for a worker working a five-day week). This can include public and bank holidays. The entitlement for part-time workers is calculated on a pro-rata basis.

This guide shows you how to calculate a worker’s holiday entitlement and pay. It also explains notice requirements, how you may impose restrictions on when workers can take their holiday, and the relationship between annual leave and sick leave. Finally, the guide demonstrates how to pay leavers for any untaken holiday.

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Statutory paid holiday entitlement

Almost all workers above school leaving age – not just employees but also, for example, agency and casual workers – are entitled to 5.6 weeks’ paid holiday per leave year (28 days for a worker working a five-day week).

The 5.6 weeks is a minimum entitlement – you can choose to offer more.

You can count any days off for public or bank holidays towards a worker’s statutory holiday entitlement – but only as long as you pay them for those days off.

Workers below school leaving age must have a two-week break during school holidays. See our guide on employing young people.

When leave years may start

You may decide to have one date when your business’ leave year starts or have different start dates for individual workers (or groups of workers).

If you don’t have written leave arrangements, a leave year will start:

• on the date a worker’s employment begins – if the worker started work after 1 October 1998 
• on 1 October – if the worker started work on or before 1 October 1998

Staff working a six-day week

The statutory paid holiday entitlement is capped at 28 days. So, although 5.6 weeks would equal 33.6 days for someone working a six-day week (5.6 x 6), staff working a six-day week are only entitled to 28 days’ paid holiday.

Holiday entitlement and the contract of employment

You must set out an employee’s paid holiday entitlement in their written statement of employment. This should enable them to work out their entitlement and pay for any untaken holiday if they leave.

Workers not entitled to the statutory minimum paid holiday entitlement

The following types of worker do not have the right to benefit from the minimum paid holiday entitlement:

• the self-employed, who can take as little or as much holiday as they choose
• those whose jobs may conflict with the requirement to take annual leave requirements, eg the armed forces, the police, those involved in civil protection

The following types of worker are entitled to only four weeks’ paid holiday:

• those working in share fishing
• those working in merchant shipping
• mobile workers on inland waterways and lakes
• mobile staff working in the civil aviation sector

Carrying over unused paid holiday

A worker may wish to carry over unused holiday from the current leave year to the next.

Under European Union law, a worker must take at least four weeks’ holiday per leave year. If they take less than this, they cannot carry it over.

However, in the UK, the statutory entitlement is 5.6 weeks. What a worker may do with the additional 1.6 weeks depends on their contract of employment. You can either:

• have an arrangement that workers must take their full statutory entitlement of 5.6 weeks in any leave year
• allow workers to carry over any of the additional 1.6 weeks that remains untaken into the next leave year – although they must take it by the end of the next leave year

If a worker has an additional contractual entitlement over and above the 5.6 weeks, it again depends on their contract of employment whether or not they either can carry it over or will receive pay in lieu for any of the entitlement that remains untaken.

If you do allow workers to carry over any contractual annual leave entitlement, you can have your own rules on when they must take it. For example, you could state that workers must take the carried-over leave within three months of start of the next leave year.

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Calculating and paying holiday pay

A worker’s entitlement to paid annual leave starts on the first day of employment and is not subject to a minimum period of employment.

For each week of leave accrued, workers are entitled to one week’s pay. A week’s pay is calculated according to the type of work carried out:

• for workers on fixed hours and pay, it equals the amount due for a week’s work
• for workers on variable hours and pay (bonus, commission or piece workers), it equals the average hourly rate multiplied by the normal working hours in a week
• for shift workers, it equals the average weekly hours of work in the preceding 12 weeks at the average hourly rate
• for workers with no normal working hours, a week’s pay is the average pay received over the preceding 12 weeks

To calculate the average hourly rate, you only have to count the hours where the worker was working and the pay that related to those hours. Guaranteed overtime hours should be included in this calculation.

The 12-week reference period should be made up of 12 weeks in which pay was due to the worker. Therefore, if no pay was due to the worker in the fourth week of this period, the reference period should cover weeks one to three and weeks five to 13.

Payments for untaken statutory holiday

In the UK, the statutory annual leave entitlement is 5.6 weeks. A worker must take at least four weeks’ paid holiday per leave year.

What a worker does with the remaining 1.6 weeks depends on their contract of employment.

For example, you could allow them to carry those 1.6 weeks into the next leave year or state that all 5.6 weeks must be taken by the end of the leave year.

However, you cannot make a payment in lieu for any days that remain untaken.

Payments for untaken contractual holiday

At the end of a leave year, you may find you have a worker who has some untaken contractual annual leave, ie annual leave over and above the statutory minimum of 5.6 weeks.

Depending on their contract of employment, the worker may be entitled to either carry over the untaken days, or receive a payment in lieu of those untaken days.

When to pay workers their statutory holiday pay

Workers must receive their statutory holiday pay at the time that leave is actually taken. It’s therefore unlawful to not pay a worker while they are on holiday and pay them an allowance as part of their wages or salary instead – a system known as rolled-up holiday pay.

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Calculating holiday entitlement for atypical workers

There are alternative ways of working out the holiday entitlement for workers who don’t have regular working arrangements or patterns.

Part-time workers

Paid holiday entitlement is calculated pro-rata for part-time workers.

So if a member of staff works three days a week, they are entitled to 16.8 days (5.6 x 3).

Shift workers

It is sometimes easier to calculate holiday entitlement as shifts.

So if a member of staff works four 12-hour shifts followed by four days off, the average working week is 3.5 12-hour shifts. So 5.6 weeks’ holiday is 5.6 x 3.5 = 19.6 12-hour shifts.

For other shift patterns, it may be easiest to calculate according to the established repeating pattern.

More irregular working patterns: calculating holiday in hours

If a member of staff works annualised hours, you need to calculate how many hours a week they work on average over the whole year.

So if a member of staff works a total of 1,600 hours a year, or 34.48 hours a week over 46.4 weeks of the year, the holiday entitlement is 5.6 weeks x 34.48 hours a week = 193.09 hours’ holiday for the year.

The statutory holiday entitlement is excluded from the average working week calculations.

The guidance for term-time only workers is currently under review.

For someone working compressed hours, for example, a 36-hour week over four days instead of five, their annual holiday entitlement is 36 hours x 5.6 weeks = 201.6 hours holiday for the year.

Rather than taking a day’s holiday, they would take the number of hours that they would have otherwise worked on that day (ie for 36 hours worked over four days, they would take nine hours’ holiday for each day otherwise worked).

Casual workers

If a member of staff works on a casual basis or very irregular hours, it is often easiest to calculate holiday entitlement that accrues as hours are worked.

The holiday entitlement of 5.6 weeks is equivalent to 12.07 per cent of hours worked over a year.

The 12.07 per cent figure is 5.6 weeks’ holiday, divided by 46.4 weeks (being 52 weeks – 5.6 weeks). The 5.6 weeks are excluded from the calculation as the worker would not be at work during those 5.6 weeks.

So if someone works 10 hours, they are entitled to 72.6 minutes paid holiday (12.07 ÷ 100 x 10= 1.21 hours = 72.63 minutes).

Part days

Calculations may result in part days, eg 22.4 days for someone working four days a week.

If this is the case, you could:

• Allow the worker to leave early or arrive late one day, eg for someone working an eight-hour day taking 0.4 of a day’s holiday, you could allow them to leave after working for four hours and 48 minutes (480 minutes x 0.6 of a working day = 228 minutes) or allow them to arrive three hours and 12 minutes late (0.4 of a working day).
• Round the entitlement up to the nearest full day – or half day if this is still easy for you to administer. You cannot round entitlements down.
• Allow the worker to carry the part day over into the next leave year (and then perhaps round up to the nearest full day).
• Pay them for a part day. However, you can only do this if the worker’s paid holiday entitlement is more than 5.6 weeks as you cannot pay a worker in lieu of untaken statutory holiday – see the page in this guide on calculating and paying holiday pay.

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Holiday entitlement for employees on other statutory leave

Employees taking statutory maternity, adoption, paternity and parental leave will continue to accrue statutory paid holiday and, in many cases, any contractual holiday entitlement.

Holiday entitlement and maternity/adoption leave

Employees on maternity or adoption leave continue to accrue both statutory and any contractual paid holiday during both ordinary and additional maternity/adoption leave.

Statutory paid holiday cannot be taken at the same time as maternity/adoption leave. When you are planning for the maternity/adoption leave, you may wish to discuss taking any outstanding holiday and perhaps delay the start of their maternity/adoption leave.

Alternatively, it may be possible for them to take holiday in the period between their maternity/adoption leave finishing and the end of the leave year.

When you are planning, you should both be aware that maternity and adoption leave cannot start later than the date of the child’s birth or placement for adoption, so an early birth or placement could shorten the amount of annual leave the employee is able to take.

See our guides on maternity leave and pay and adoption leave and pay.

Holiday entitlement and paternity leave

Employees continue to accrue their statutory and any contractual paid holiday entitlement while they are on statutory paternity leave and additional paternity leave.

See our guides on ordinary paternity leave and pay and employee rights during additional paternity leave.

Holiday entitlement and parental leave

Employees continue to accrue their statutory paid holiday entitlement while they are on parental leave.

Whether or not they accrue any contractual holiday entitlement depends on their contract of employment.

See our guide on parental leave and time off for dependants.

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Pay and time off on public and bank holidays

You do not have to give staff paid time off for bank and public holidays. However, you should set out in a worker’s contract of employment:

• any right to time off on bank and public holidays
• whether or not that time off is paid
• what you will pay them if they work one of these days, ie whether you will pay the normal rate of pay or an enhanced rate, eg ‘time-and-a-half’ or ‘double time’

Note that if you allow a worker time off for bank and public holidays over a significant period of time, it may become an implied term of their contract via custom and practice, ie the term is not actually in the contract document but is still part of the contract of employment.

Part-time staff have the same entitlement to leave as full-time workers. Therefore, if full-time staff are given paid leave for bank and public holidays, part-time workers should also receive this benefit on a pro-rata basis.

This can be a problem if most of the bank and public holidays fall on days when a part-time worker doesn’t normally work.

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In a particular leave year, five of the eight bank and public holidays fall on a Monday, two on a Friday and one on a Tuesday. As such, the part-time worker only benefits from one of the bank and public holidays – the one that falls on the Tuesday. The employer should therefore permit them three days’ paid annual leave in lieu to make up for the shortfall.

Bank and public holiday dates

When the Christmas and New Year public holidays fall at a weekend, other weekdays are declared public holidays. These are usually the following Monday and, if necessary, the Tuesday.

If a worker normally works weekends, and Christmas Day, Boxing Day or New Year’s Day fall on a weekend, entitlement to time off depends on their employment contract. This may be something that is explicitly agreed in the terms of the contract or could have been incorporated through custom and practice.

Find out about bank holidays in the UK on the Directgov website- Opens in a new window.

Easter bank holidays

Because the date of Easter varies, some April-March leave years may contain two Easters and others none.

For example, if you give your full-time staff four weeks’ holiday plus time off for bank and public holidays, that would mean 30 days’ holiday one year and 26 days another.

In such cases, to ensure your full-time staff receive their statutory 28 days’ holiday, you should either:

• agree with workers that the necessary holiday is carried over in a leave year where two Easters fall
• give an additional two days’ holiday in a leave year where Easter doesn’t fall (to ensure staff get their minimum 28 days’ holiday that year)

Special bank holidays

Dates of bank holidays can be changed or extra holidays declared, for example to celebrate special occasions.

For example, there will be an extra bank holiday on 5 June 2012 to celebrate the Queen’s Diamond Jubilee.

A worker’s minimum paid annual leave entitlement is 5.6 weeks. There is no statutory time off for bank holidays and public holidays. However, you may choose to include these as part of that worker’s entitlement.

Where a worker’s contract states they are entitled to the statutory minimum annual leave, an extra bank holiday would not increase their paid holiday entitlement.

However, if a worker had a contract that entitles them to 20 days’ annual leave plus all bank and public holidays, they may be entitled to the additional bank holiday as annual leave.

The Jubilee will be a significant public occasion. Therefore, you may want to:

• consider whether it will affect the morale of your workers if your business doesn’t join in with the celebrations
• agree with your staff in advance how you are going to treat this day

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Taking holiday – notice periods, restrictions and sickness

Workers must give you notice that they wish to take leave. You can agree the notice period with your workers and should set this out in writing.

If there is no agreement in place, they must give notice of at least twice the length of the intended leave period. You must reply within the same length of time as the intended leave.

For example, if the worker gives two days’ notice for one day’s leave, you must reply within one day. Even if the worker gives sufficient notice, you may still refuse the request – but be as reasonable as you can.

Restricting when holiday may be taken

You may restrict the taking of leave. Restrictions could:

• be stated in the employment contract
• have built up via custom and practice
• be negotiated with trade union or employee representatives

Examples include:

• specifying periods when leave may or may not be taken
• capping the amount of leave that can be taken at any one time
• shutting down for certain periods, eg between Christmas and New Year or for two weeks in August

If you don’t have an agreement for taking leave and you want workers to take all or part of their holiday entitlement on certain dates, you must give notice of at least twice as long as the leave period.

Resolve clashes between requests for leave by considering the needs of the business, eg peak season or a quieter period, the individual circumstances or by setting out clear rules for booking leave. It may be helpful to formalise cover for key staff on annual leave.

If you set restrictions on when holiday can be taken, bear in mind the need to avoid indirect discrimination – see our guide on how to prevent discrimination and value diversity.

You should also note that it’s unlawful to prevent a worker taking their statutory paid holiday entitlement. Therefore you may have to allow a worker’s annual leave request right at the end of the leave year to ensure that they have taken their full entitlement of 5.6 weeks.

Accruing annual leave during sick leave

A worker continues to accrue their statutory minimum holiday entitlement as normal while absent from work due to sickness. This is regardless of how long the period of sickness lasts.

Depending on the terms of their employment contract, they may also accrue any additional contractual annual leave that they would normally be entitled to.

Taking annual leave during sick leave

A worker is entitled to take statutory annual leave while on sick leave, if they wish.

If the worker chooses to take holiday while you are paying them statutory sick pay (SSP), you carry on paying them SSP during their time on annual leave and count this sum towards the amount of holiday pay you pay them.

If the worker chooses to take annual leave while you are paying them occupational sick pay (OSP), you pay them their normal holiday pay instead of OSP.

If the worker chooses to take annual leave while they are on sick leave but they are not receiving any sick pay, you pay them their normal holiday pay.

A worker is most likely to choose to take annual leave while on sick leave if they are:

• not entitled to sick pay of any kind
• on sick leave for a long period and, as a result, you have stopped paying them sick pay
• due to return to work shortly before the end of the leave year and, as a result, would be unable to take their full holiday entitlement following their return to work

Changing annual leave to sick leave

A worker can choose to change a period of annual leave during which they are sick to sick leave. This would occur if they either:

• become sick while on annual leave
• have a period of sick leave that continues into a pre-arranged period of annual leave

Once the worker returns to work, they can then make arrangements to take the annual leave they ‘missed’ at a later date.

Where a worker is on sick leave instead of annual leave, you should consider asking them for evidence of their sickness in line with your usual sickness absence procedures and in line with any eligibility criteria for OSP.

For example, to qualify for full pay while sick, you could:

• require a worker to inform you as soon as reasonably possible that they are sick
• request that they provide you with medical evidence of that sickness

For more information about sick pay, see our guide on how to understand statutory sick pay when paying it.

Carrying over annual leave that is left untaken due to sickness

If a worker is unable to take all of their statutory annual leave entitlement within a leave year because of illness, they may be entitled to carry forward the unused statutory entitlement to the next leave year.

If you need further advice on sick leave and/or annual leave, you should contact the Acas Helpline on Tel 08457 47 47 47.

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Holiday pay on termination of employment

When your workers leave – even if you have dismissed them without notice for gross misconduct – they must receive pay for any holiday they are entitled to in the current leave year but have not taken.

This entitlement is not subject to a minimum period of employment.

Calculating pay due to workers who resign

You can calculate the pay due using the formula (A x B) – C, where:

• A is the total holiday entitlement for the year
• B is the fraction of the year to the date of leaving
• C is the amount of holiday already taken

For example, a part-time worker works three days per week. Like all workers, they are entitled to 5.6 weeks’ paid annual leave.

They leave seven months into the leave year having taken eight days off. This is the equivalent of 2.66 weeks (8 ÷ 3). Note that, if you need to, you should round this figure down to prevent an underpayment.

Applying the formula above: 5.6 x (7 ÷ 12) – 2.66 = 0.61 weeks’ leave to be paid in lieu. (If you need to, you should round this final figure up to prevent an underpayment.)

If you pay a worker on a daily basis, you can also work out their outstanding holiday entitlement in days.

For example, a worker working five days per week is entitled to 5.6 weeks per year, the equivalent of 28 days (5.6 x 5).

They leave three months into the year having taken four days off.

Applying the formula above: 28 x (3 ÷ 12) – 4 = 3 days’ leave to be paid in lieu. If you need to, you should round up this final figure to prevent an underpayment.

You need to get the worker’s signed agreement to make a deduction from the final payment to them for any leave taken in excess of their entitlement.

Calculating pay due to workers who you dismiss

If you dismiss a worker, they have the right to be paid for leave accrued during their period of employment, no matter how short it was.

In order to work out B when using the formula above, you need to know the worker’s ‘termination date’.

If you dismiss a worker with notice, the termination date is the date the notice period expires.

If you dismiss a worker without notice, the termination date is the date you summarily dismissed the worker.

An employee’s written statement of employment particulars should contain information to enable them to calculate their entitlement to accrued holiday pay when they leave.

Taking annual leave during the notice period

A worker may wish to take some or all of their outstanding annual leave as part of their notice period. This should be treated the same as for any other holiday request – taking into account your usual procedure for authorising annual leave. See the page in this guide on taking holiday – notice periods, restrictions and sickness.

You can also insist that a worker takes any holiday owed to them as part of their notice period – as long as you give them their correct period of notice.

If a worker takes part of their paid leave entitlement during their notice period, you may reduce their notice pay by the amount of holiday pay, provided it is in respect of the same leave year.

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CASE STUDY

Here’s how I manage staff annual leave

Based in Marden, Kent, Water for Work and Home supplies serviced water coolers and dispensers to over 10,000 UK offices and homes. The company philosophy is based on the positive impact of good hydration on performance, productivity and wellbeing. Here, HR manager Andrea Ings explains how the business successfully manages annual leave for its 100-plus employees.

What I did

Have clear policies and procedures

“We put together our annual leave policy with advice from Acas and from an external HR consultant who we brought in to help compile our staff handbook. That was a great starting point, but you have to remember it’s your responsibility to regularly update things so that procedures remain compliant.

“We include the procedure in the staff handbook and in our contract of employment too, we also explain the process at induction and regularly reinforce the process informally through our line managers. We have a single leave form that covers all types of leave, not just annual leave, as we’ve found this is easier to administer. The form is made available for staff both as a hard copy from the HR department or a soft copy online.

“An employee wishing to book annual leave first checks with their line manager, then submits the leave form for their manager to sign before sending on to HR. All annual leave records are kept on our central computer system, which is integrated with our payroll system.”

Balance business and employee needs

“Whilst the needs of the business must be considered when managing annual leave, we also aim to engender a positive attitude towards leave that starts with management and filters down to all staff.

“We actively encourage employees to take their full leave entitlement because it’s better for wellbeing and productivity. For the same reasons, we don’t generally allow unused leave to be carried over into the following year, and we encourage staff to spread their leave evenly throughout the year. However, we try to remain flexible and treat requests on an individual basis.

“About three months before the end of the holiday year, we run a report off the system to check who has outstanding leave and remind them to book it and take it.

“We do have certain restrictions on taking leave, which we list in the staff handbook. For example, we can only allow a certain number of Water Men (delivery drivers) to be on leave at the same time in order to preserve our customer delivery schedules.”

Plan ahead

“Planning ahead wherever possible avoids unnecessary disruption. The staff handbook and contract of employment stipulates at least one month’s notice for periods of leave lasting four days or longer, and at least one week’s notice for leave of three days or less. Again, we try to remain flexible and accommodate last-minute requests if we can.

“We keep a company holiday diary in Outlook that is accessible to all employees. This helps with planning because we can see exactly what’s happening and employees can check for obvious clashes before requesting leave.

“Inevitably, there are always one or two conflicting requests to deal with, mostly concerning too many employees wanting to take the same week off. We make it clear that the general rule is ‘first come, first served’, but that in certain exceptional circumstances we may consider alternative arrangements.”

What I’d do differently

Make part-time entitlements clearer

“Our part-time workers are entitled to pro-rated bank holidays, but in the early days this sometimes caused confusion. We’ve recently introduced a simple form listing the eight bank holidays in a year beside two columns, one for paid bank holidays, one for unpaid. Staff simply choose, within their entitlement, which bank holidays they want to be paid for and tick the appropriate column on the form. This really helps with forward planning.”

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