Holiday, use it or lose it! An Employers’ Guide

All employees are entitled to a set number of days paid annual holiday, this is outlined in law and as a result should be clearly communicated to employees in things like employment contracts.

Employers should encourage employees to take their holiday entitlement in full, throughout the year. However, inevitably, there will be some employees that do not use all of their annual allowance and this can be a source of contention if not clearly communicated to staff about what happens to unused holiday at the end of the year.  

You should communicate clearly what your company’s annual leave policy is, and its stance towards holiday carry-over and whether holiday will be lost if not used.

To ensure that you create an effective and legally compliant holiday policy that works for employees and your business, contact the HR and Employment Law team at Croner. Get award winning advice, tailored to your business on 0808 501 6651. 

What are my employees' holiday entitlements? 

Your employees are entitled to 5.6 weeks of paid holiday each year, this is the equivalent of 28 days including bank holidays for a full time employee working 5 days a week (this can be pro-rata).

You should remind employees of their statutory holiday entitlement and encourage them to take their annual leave as it is good for both their mental and physical health to switch off from work for an extended period of time. As a result this is also good for your business as well rested employees are less likely to experience things like burnout. 

Can employers’ operate a ‘use it or lose it' policy for paid annual leave?

In short, yes. A ‘use it or lose it’ system means that employees must use their accrued holiday in that holiday year, e.g. Jan-Dec, or risk losing the unused number of days (and the pay). 

It is up to the employee to request their holiday in line with the company's holiday policy and at reasonable times. Employers should accommodate holiday requests, where possible and allow employees to take their full complement of holiday throughout the year.

Bear in mind that if an employee leaves their role, any unused holiday pay they have accrued will need to be paid. This is also true in the case of redundancy and employers should take care to ensure that the employee is paid the owed amount, otherwise this can result in a costly legal case. 

You should also inform employees if there is a maximum carryover period e.g. 5 days etc. that employees move over to the next holiday year. This should be clearly documented in employee contracts. 

Other leave and holiday

If an employee is on long term sick leave then legally they are entitled to carry over 4 weeks’ (maximum) holiday entitlement. This must be used within 18 months, starting from the end of the leave period that it was accrued in.

Employees on statutory leave like maternity, then they must be allowed to carry over their annual leave allowance to the next year. This should be communicated and arranged with the employee as soon as possible, once the statutory leave has been confirmed. 

In the event you don’t let an employee take all of their holiday, you can open yourself up to legal claims. Staff can legally carry over holiday (up to 4 weeks) in the following circumstances:You don’t communicate that there is a ‘use it or lose it policy’.

• You do not let them take all their holiday or don’t encourage them to take it at all.  

Creating a holiday policy that works for your business and your staff

Under your employer’s duty of care you should ensure the mental and physical wellbeing of your employees. As part of this you should ensure that your workforce gets sufficient time off to rest and recharge. 

Include terms regarding annual leave and holiday pay in contracts

This is crucial, holiday terms should be included in employment contracts, else you leave yourself open to the potential of costly legal litigation. You should also include the terms of other forms of leave as well so that employees have a reference to these.

Ensure you include things like when the holiday year starts and ends (some companies run their holiday years from the start of the tax year, whilst some start from Jan through to December).

Another important point to include is the rules on taking holiday, for example if you have a Christmas or public holiday shutdown period and employees will need to use leave to cover this then it should be documented in staff’s contract of employment and employee handbooks.

Use absence tracking software 

Using software to keep track of employees’ absence not only allows for effective planning but it can also highlight those employees who aren’t using their allowance. If you encounter this then encourage them to take time off. Whilst it is their choice whether they use it or not, you should ensure that they have the chance to take their accrued holiday. 

There is sometimes an issue where several employees have collected a large number of unused leave dates towards the end of the year. Using absence trackers can help avoid this, and also help you manage employee time off fairly if there are a number of requests to deal with at any one time.

You should ensure that the method for submitting holiday requests is made simple, this can be either through software, form or email. This can help ensure that members of staff can request time off easily. 

Need assistance with creating holiday policy? 

Contact the HR and Employment Law Advisory team at Croner. With over 80 years’ experience in assisting businesses with creating legally compliant workplace policy, we can ensure your organisation remains on the correct side of employment legislation.

Call us today on 0808 501 6651.