Do I have to pay my staff for holidays? A guide to annual leave entitlements

With the ever-changing COVID-19 travel restrictions, vaccine passports and quarantine rules, booking a holiday has never been more confusing. But what about holiday pay? Is it really a legal responsibility to pay your staff for holidays?

The short answer is 'yes' - but the ins and outs of annual leave entitlements are a little more complex. By law, an employer must provide paid leave. But how much should you offer? Can you refuse leave? And what about part-time or zero hours workers? Here, we outline the holiday pay facts that every employer needs to consider.

Who is entitled to holiday pay, and how much should they get? 

Do I have to pay my staff for holidays? A guide to annual leave entitlements

All contracted workers, without exception, are entitled to 5.6 weeks of paid holiday per year. This sounds like a lot, so how does that number work in practice? To work out how much paid holiday an employee is entitled to, take the number of days they work per week, and multiply this by 5.6. 

For example:

  • A full-time employee working 5 days a week must receive at least 28 days' paid holiday a year (5 x 5.6 = 28).
  • A part-time employee working 2 days a week must receive 11.2 days' holiday (2 x 5.6 = 11.2).

As an employer, it's up to you whether or not to include the UK's eight bank holidays as part of annual leave entitlement. It's also worth noting that the legal minimum paid holiday is capped at 28 days, so someone working 6 days a week is still not entitled to more than 28 days' annual leave. 

Agency workers and those with irregular hours, such as individuals on a zero hours contract, must also receive holiday pay. It's usually easier to calculate this based on the number of hours worked, as they may not have a set number of working days per week. The government has developed a holiday entitlement calculator to make this process easier.  

The Accrual System - what is it and how does it work?

Accrual essentially refers to any situation in which holiday entitlement can build up. Holiday pay begins to accrue as soon as a worker starts a new job. 

In their first year in a job, an employee will be entitled to one twelfth of their leave each month. This will accrue for every month worked. So, someone working 5 days a week in a new job would be entitled to 7 days' leave after three months (28 ÷ 12 x 3 = 7).

Employees also have the right to accrue holiday entitlement while off sick, as well as during maternity, paternity or adoption leave.

Booking time off - what is the government guidance?

An employee is usually expected to give notice if they want to book time off. It is usual for the notice period to be at least twice as long, plus one day, as the amount of leave a worker plans to take. This would mean, for example, 15 days' notice for a week's leave. 

As an employer, you do not have to accept a leave request. However, when refusing or cancelling leave you should give as much notice as the amount of leave requested, plus one day - this would be 8 days' notice for one week's requested leave. 

Employers are also within their rights to tell workers when they can and cannot take leave. For instance, asking employees to take leave over Christmas, or restricting leave during busy periods. When asking staff to book leave, an employer should give a notice period of twice the amount of leave they are asking employees to take.  

While these notice periods are common practice, if a contract specifies a different system, the contract will apply. Nonetheless, for planning purposes, as well as staff morale, it is beneficial to have a fair and effective system in place for booking leave.

Can staff carry over untaken leave into the following year? 

Some holiday entitlement can be carried over into the following year, but this is only a small amount - a maximum of 8 days for a worker with 28 days' leave. This means a worker will lose most of their holiday if they do not take it, so it is the employer's responsibility to encourage staff to take all their allowed leave.

The rules were recently relaxed for key workers whose leave has been affected by COVID-19. These workers can now carry over up to 4 weeks' unused leave into the next 2 years. 

Clearly it is a legal requirement to pay your staff for holidays, but the rules can seem complex. If you need help to navigate the world of annual leave entitlement, AMR's friendly and experienced team of bookkeepers are here to help. Give us a call on 01892 559490 or get in touch using our online enquiry form.

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