What is annual leave?
Annual leave, often referred to as "holiday", is a period of time that employees are entitled to take off work each year. In the UK, the majority of workers have the right to a set amount of paid holiday every year, also known as their statutory leave entitlement.
What is statutory annual leave?
Statutory annual leave refers to the minimum amount of legally required holiday that employers must provide their employees.
For full-time employees, this equates to 5.6 weeks, or 28 days, per year for a 5-day week.
Statutory annual leave is paid in full by the employer, which means individuals are paid their full salary whenever they take that time off.
When starting out, a lot of start up founders will offer the statutory minimum to employees in order to keep costs down - remember, annual leave is paid by employers at the employee’s full day rate.
Learn more about UK holiday entitlement.
Does annual leave include bank holidays?
It's up to the employer to decide if they want to include bank holidays in the statutory minimum 5.6 weeks' paid holiday, or give them on top of the statutory minimum.
In some industries, many employees or workers are required to work bank holidays (eg in hospitality).
Many employers also offer the possibility for employees to ‘opt-out of bank holidays’ - meaning they can choose to take these 8 days elsewhere throughout the year. This idea is becoming more popular amongst UK companies as it can be seen as more respectful of employees’ diverse religious and cultural practices.
Either way, employers should make sure that their rules for bank holidays are clearly outlined in the employee's contract.
Can you offer more annual leave?
Although 28 days per year (or 5.6 weeks) is the statutory minimum, a lot of employers choose to offer their employees more annual leave. A larger holiday allowance is one of most popular employee benefits, as it offers a better work-life balance and can boost your company’s competitiveness when wanting to recruit the best talent.
Offering more annual leave could look like:
Offering a bigger paid holiday allowance to their staff - for example 30 or 32 days instead of 28 days
Deciding to make annual leave unlimited for employees, which has been a popular practice with some start ups in recent years
Fixed days vs unlimited time off
Offering a fixed amount of days each year is typically more common. Unlimited time off is less common, but it allows employees to take leave as needed, promoting trust and flexibility - though it does come with its own challenges around abusing the policy or even a lack of utilisation.
Other forms of discretionary annual leave
On top of ‘statutory’ annual leave, it's customary for many companies to offer additional annual leave policies as part of their benefits package, especially in the tech sector. Additional leave examples include:
A day off for an employee’s birthday
‘Duvet days’
Paid leave whenever an employee becomes a pet owner
Compassionate leave personal emergencies
How is annual leave calculated?
As soon as an employee starts a new job, they’ll start accruing their annual leave. That includes when they're on:
A probationary period
Sick leave
Maternity, paternity, adoption or shared parental leave too
Annual leave is typically calculated based on an employee's working pattern. For full-time workers, it's usually a straightforward process. But figuring out holiday entitlements for part-time or irregular hours will require a pro-rata calculation.
Does annual leave start or reset on a calendar year?
Technically, no. Annual leave is accrued based on how much an employee has worked in a year.
However, most companies will follow the calendar or financial year as their annual leave allowance cycle. They’ll offer their employees their full annual allowance upfront from January 1st or April 1, and this will reset on January 1st or April 1st the following year.
This helps to minimise the amount of admin involved with calculating holiday accruals for employees, and provides more flexibility for employees who may want to book holiday earlier in the year than they would have accrued.
How does holiday accrual work?
Holiday accrues throughout the year. For each month of work, an employee accrues a fraction of their total holiday entitlement. This can be calculated by dividing the total annual leave (eg 28 days) by the total number of months in a year (12).
How much holiday do employees accrue each month?
In the UK - and based on the statutory amount of annual leave a full-time employee would get in a year - they’ll accrue 2.33 days of holiday each month (28 days divided by 12 months). However, this amount will depend on your own annual leave policy. If you have a more generous annual leave allowance, employees will accrue more holiday every month.
Carrying over holidays
UK law permits employees to carry over up to 1.6 weeks of unused annual leave into the next year under certain circumstances - for example if they’ve not been able to take up their full allowance due to work commitments, sickness, or maternity leave.
Beyond this statutory limit, you can choose to offer more flexibility to your employees when it comes to carrying over annual leave.
You can learn more about carrying over annual leave in our guide.
Holiday pay in the UK
Holiday pay in the UK is a critical component of employee compensation and a legal requirement under UK employment law. For each hour an employee works, they're also earning a rate of pay towards their holiday.
When an employee takes their statutory leave (5.6 weeks for full-time employees), they're entitled to be paid the same rate as if they were working.
If an employee leaves a company, they are entitled to receive pay for any unused statutory holiday.
We've written a separate guide on calculating holiday pay for more in-depth information.
FAQs
What is the minimum annual leave UK employers must provide?
The minimum annual leave employers must provide in the UK, otherwise known as statutory leave, is 5.6 weeks or 28 days for a full-time employee. However, this can include bank holidays, of which there are typically eight in a year.
When can an employee request leave?
Employees can request leave at any time, but it's usually subject to approval from their manager or HR department. Some companies have a policy requiring notice equal to twice the length of the requested leave.
Can an employer dictate when leave is taken?
Yes, employers can dictate when leave is taken, especially for operational needs or if a leave request is not feasible due to business demands. However, this should be done reasonably and employees should be notified in advance.
Can an employer cancel a holiday once it’s been approved?
Employers have the right to cancel pre-approved leave, but should avoid doing so unless absolutely necessary. If they do, they should provide the same amount of notice as the length of the holiday, and may need to reimburse the employee for any costs incurred due to the cancellation.
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