The holiday season and managing annual leave

As we approach the holiday season once again, what better time to send out a summary of our top tips and FAQs for managing annual leave.

Should I have an annual leave policy?

It’s advisable to have a clear policy in place outlining the rules and procedures for requesting annual leave. All wider policy information should be kept separate from your employment contracts, so it can evolve over time. Basic information such as holiday entitlement, how holidays will be calculated, whether bank holidays are normal working days and deductions for holiday overpayments should be recorded in your employment contracts.

What should my policy include?

Implement a straightforward procedure for requesting holidays and set a minimum notice requirement for annual leave requests; this way, you can plan for minimal disruption to the business.

Specify how annual leave requests will be dealt with so you have a fair system in place should you receive multiple requests for the same dates i.e. approval on a first come first served basis. This is a common issue around bank holidays and school holidays.

Proactively manage your team’s holiday entitlement throughout the year to avoid an influx of requests towards the end of the year. If you notice someone is not using their annual leave, you should prompt them to book time off. 

Can I tell my employees when to take annual leave?

You can enforce annual leave so long as you give double the amount of notice for the leave you would like the employee to take, i.e. if you want an employee to use 2 days’ holiday, you will need to give them 4 days’ advance notice. This is useful for dealing with shutdown periods, downturns in work and for employees who “forget” to book their own leave.  

Do I need to pay employees for outstanding annual leave?

If employees choose not to use up their annual leave, then they are not entitled to be paid in lieu of outstanding holidays, unless they are leaving your company.

What happens when an employee leaves?

As a general rule, outstanding holidays must be paid up. When an employee resigns, check their contract to clarify if you have the right to force them to use up leave during their notice period. This will save you money!  Even if your employee resigns without giving notice, they will still be entitled to outstanding holiday pay.  Check their contract, to clarify whether you have the right to recover any additional costs if an employee resigns and leaves you in the lurch!

If your employee is dismissed, they will still be entitled to holiday pay, but again check their contract as you may have the right to withhold contractual holiday pay (anything above the statutory entitlement.)

What happens if an employee goes off sick when annual leave was pre-booked?

Confirm whether an employee still intends to take their pre-booked annual leave if they are off sick at the time, as they may decide to defer the leave until they are well.

Can an employee use annual leave whilst off sick?

Many employees will book annual leave during periods of long-term sick, particularly if they are only receiving SSP, it’s a way of bumping up their pay. After the period of annual leave, if they are still off sick then they will revert to SSP without having to serve a further 4 waiting days as the absences will be linked (assuming the annual leave period was less than 8 weeks!)

If an employee rings in sick and requests to use annual leave instead, consider the impact of agreeing that they can take annual leave.  If the day is recorded as a holiday, it won’t count towards an employee’s sickness absence record, which could prove problematic when managing ongoing sickness absence issues and annual leave.

Can I pay rolled up holiday pay?

Some good news at last, the answer is yes!  If you have staff or casual workers who work variable hours, and your holiday year runs from 1 April to 31 March, from 2024 you are now able to pay rolled up holiday pay. This means that you PAYG and in most cases employers will pay an additional 12.07% on top of the workers’ earnings (this equates to the statutory minimum of 28 working days for full time workers).  Any time taken off is then unpaid, thus removing the burden of having to work out the average earnings over the previous 52 weeks worked to calculate holiday pay. 

Can staff carry over holiday pay?

Employees who have been on statutory leave (such as maternity leave) have the right to carry the whole 5.6 weeks forward into the next holiday year. 

Employees who have been on long-term sick have the right to carry over 4 weeks annual leave.

Where employees have not had a reasonable opportunity to take their leave, employers must allow them to carry over 4 weeks leave, until the leave can be taken. 

Any outstanding leave accrued and untaken, because of coronavirus should have been taken by 31 March 2024.

What is normal pay for the purposes of calculating holiday pay?

By law holiday pay should include commission that is intrinsically linked to the performance of tasks, payments for professional or personal status and overtime that has been regularly paid in the preceding 52 weeks.   This rules only applies to the 4 weeks holiday derived in the EU and confirmed in UK law. 

Here at Spectra HR, annual leave is one of the most common topics we get asked about. If you’re still not sure and need our advice, whether it’s calculating the holiday entitlement for a part time employee or you’re looking to introduce an Annual Leave Policy or review the wording in your contracts of employment, then contact us for expert advice.