Managing Annual Leave Effectively

Dylan Loughlin

Last month, Lisa’s blog post covered the importance of understanding the different types of leave in order to effectively manage leave within a business. In this follow up piece, I will delve deeper into Annual Leave including notice periods, restrictions and everything else you need to know to manage holidays effectively.

Knowing How Much Holidays To Give

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 or a six-day week).

The 5.6 weeks is a minimum holiday 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. See bank and public holiday dates.

Workers below school leaving age must have a two-week break during school holidays. Read more on employing children and 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 do not have written leave arrangements, a leave year will start on the date a worker’s employment begins and on each subsequent anniversary of that date.

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 employer’s arrangements. 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 an employee 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 of 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 the start of the next leave year.

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:

  • 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 written in the contract document but is still part of the contract.

Part-time staff

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.

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.

However, entitlement will not depend on the contract if you are operating on the statutory entitlement of 5.6 weeks.

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. You should retain a record of the refusal reason, and act consistently with respect to any refusals, within reason.

Restricting when holiday may be taken

You may restrict the taking of leave. Valid reasons for restrictions could be:

  • stated in the employment contract
  • have built up via custom and practice
  • 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 – read more 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 or 4 weeks where you have agreed carry over.

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 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 statutory sick pay.

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

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 will be entitled to carry forward the unused statutory entitlement to the next leave year.

In July 2012, the Court of Appeal made a decision on an important sick leave case. It ruled that an employee on long-term sick leave is entitled to carry holiday leave forward to the next year, even if no specific request has been made to do so. On termination of employment, an employee who has been on long-term sick leave must be automatically paid for all the holiday that has been accrued over that period, whether or not a request has been made to carry it over. Recent case law suggests that employees who are unable to take holidays because of sick leave are only entitled to carry over 4 weeks annual leave unless their contract states otherwise.

There is a lot to cover when considering how to manage leave. In order to make sure you are doing so effectively, contact Copacetic today for your free HR Check Up!