Managing Holidays and Statutory Annual Leave Entitlement

Fair and compliant management of staff holidays is essential for businesses. There are many reasons for this, including legal requirements, best business practices, staff wellbeing and overall productivity.

This guide will outline legal requirements, best practices, and key considerations for managing employee holidays and statutory annual leave entitlement.

What is a ‘worker’?

To begin with, we must define what a worker is. This is important because statutory annual leave entitlement applies to those classed as workers.

So, what is a worker?

• They must be under contract (or another arrangement which may be written or unwritten) to provide work or services personally for compensation/reward.
• The compensation must be money or a benefit in kind.
• They also have a limited right to subcontract others to do their work.
• You, as the employer, need to have work for them to do for as long as the contract lasts.
• They must not be carrying out the work for you as part of their own limited company where the employer is a client or customer.

Workers are entitled to a range of benefits, including the National Minimum Wage, a maximum of 48 hours of mandatory work, and protection against unlawful discrimination or wage deductions. They are also entitled to Statutory Sick Pay (SSP) and Statutory Maternity, Paternity, Adoption, and Parental pay, where applicable.

Last but not least, they receive a Statutory Annual Leave Entitlement.

What is Statutory Annual Leave Entitlement?

For workers in the UK, Statutory Annual Leave Entitlement means that full-time employees working a five-day week are entitled to a minimum of 28 days (or 5.6 weeks) of paid annual leave every year.

Part-time employees are entitled to a pro-rata amount of leave based on their work hours compared to the full-time equivalent.

For employees who work irregular hours, leave will be accrued based on a percentage of the hours worked during a pay period (12.07% as of April 2024). This is capped at 5.6 weeks.

Offering additional Annual Leave

Statutory Annual Leave Entitlement mandates a minimum of 28 days (5.6 weeks) of annual leave for a full-time employee working 5 days a week. However, this is not the only leave that can be offered to workers.

Many businesses choose to offer additional annual leave beyond the statutory minimum. This has advantages and disadvantages, which we’ll summarise briefly below.

Whether to offer additional annual leave depends on your business's specific needs and circumstances.

Tips for managing annual leave

Beyond providing the statutory minimum entitlement to annual leave, there are several other ways to ensure that your business keeps its team happy and healthy through a well-managed annual leave policy and system.

Provide clarity

Your employee contracts should clearly outline full holiday entitlement, including bank holidays. They should also include carry-over policies (where applicable; see below) and notice periods for requesting annual leave.

Make booking simple and fair

It is important to have a fair, transparent, and user-friendly system for booking annual leave. A messy holiday booking system can lead to errors, extra administration, and accidental double bookings (causing operational issues). Introduce a fair system for determining who gets priority for holidays, particularly during popular periods.

Carry-over policy

While not mandated by law, a carry-over policy may be advantageous. Workers who have not used their full entitlement for a year may carry some over to the next. Be sure to clearly define the maximum allowed carry-over and any specific conditions in your policy.

Holiday tracking systems

Implement a system to track employee leave requests, approvals, and remaining entitlements to reduce the administrative burden of annual leave management. Online calendars (like Microsoft Teams) or dedicated software (such as Xero) can simplify this process.

Encourage forward planning

Last-minute leave requests are sometimes necessary but can cause an administrative headache. To ensure operational continuity, encourage employees to book leave well in advance, particularly for peak periods.

Other things to consider

The legal requirements for annual leave may change each year. It is very important that you or your HR team keep up to date and regularly review government resources, such as the Gov.uk Holiday Entitlement guide.