Law guide: Employment

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Annual leave

Annual leave

The rights set out in this section apply to workers (individuals contracted to provide work or services to you on a full-time, part-time or fixed-term basis). This includes employees but not self-employed staff.


All workers have a right to a minimum amount of paid leave (statutory annual leave) of 5.6 weeks in any leave year (capped at 28 days). Technically, this is split into 2 separate allocations of 4 weeks (20 days if working full-time) and 1.6 weeks (8 days if working full-time).

The statutory annual leave can include public and bank holidays. The employer can optionally use an accrual system whereby during the first year of employment the proportion of the leave which may actually be taken (with the employer's agreement) builds up over the year. In most cases, the amount of leave which may be taken builds up in advance of a pay period, at the rate of one-twelfth of the annual entitlement each month.

There are special rules for workers in England, Wales and Scotland who work:

  • irregular hours (working wholly or mostly variable working hours, such as zero-hour workers); or
  • only for part of year (having periods of at least a week each year when they are not required to work and are unpaid, e.g. term-time workers in schools).

Their statutory annual leave will accrue (build up) on the last day of each pay period at the rate of 12.07% of the number of hours that they worked during that pay period.

These rules will take effect in relation to holiday leave years that start on or after 1 April 2024.

This means that employers whose leave years, for example, run from August to July, will have to wait until 1 August 2024 to make changes. This accrue-as-you-go approach means that these workers won't have their whole year's holiday entitlement available to them at the beginning of the year. You will need to decide if they can book and take more holidays than they've technically accumulated under the new rules. See the government guidance for more information.

Leave year

Usually the 'leave year' will be specified in the contract of employment. If no mention is made of the 'leave year' it will start on 1 October or the date on which your worker commences employment (if later), and each subsequent anniversary of either of these dates.

Leave may only be taken in the leave year in respect of which it is due. There are exceptions where it has not been possible to take annual leave because of absence through sickness, or where an employee is on a period of statutory leave (such as maternity leave). Leave entitlement may not be replaced by a payment instead of the leave, except where employment is terminated. Your worker must give you written notice specifying the dates on which leave is to be taken unless there is an agreement to vary or exclude the notice.

Notice period

The period of notice must be twice as many days in advance of the earliest day specified in the notice as the number of days to which the notice relates. For example, if a worker gives notice that they will be away for 14 days, 28 days' notice in advance of the first of the 14 days' leave must be given. You can issue a similar notice requiring your worker to take leave on particular days.

You have the power to issue a notice to your employee requiring them not to take leave on particular days. Such notice must be given to the worker as many days in advance of the earliest day specified in the notice as the number of days to which the notice relates. This right can be modified or excluded by an agreement between you and your worker.

Payment for leave

When employment ends

Where a worker loses part of their entitlement to annual leave because their employment terminates during the year, they do have a right to payment instead of leave. The amount due and the way in which it is calculated may form part of an agreement between you both. If not, the period of leave to which a worker is entitled is multiplied by the proportion of the leave year that expired before employment ended. The period of leave taken by the worker between the start of the leave year and the date of termination of their employment is deducted.

If a worker received more leave in a particular year than was properly due, the regulations provide for you to be compensated.

Calculating holiday pay

Normal rate of pay

Holiday pay for the first 4-week allocation of leave must be at the normal rate of pay. This is reduced to basic pay (plus any guaranteed overtime) for the remaining 1.6 weeks' leave.

For those working fixed, regular hours, the normal rate of pay is what they would earn for a normal working week.

For those whose normal hours are regular but variable from week to week, the normal rate of pay is:

  • In England, Wales and Scotland, the average hourly rate of pay they receive, multiplied by an average of normal weekly working hours over the previous 52 weeks.
  • In Northern Ireland, the average hourly rate of pay they receive, multiplied by an average of normal weekly working hours over the previous 12 weeks (though the courts have encouraged using 52 weeks for this calculation).

For those who work irregular numbers of hours, or only work for part of the year, the rules will change for employers in England, Wales and Scotland for any holiday 'leave year' that starts on or after 1 April 2024.

From that point, the normal rate of pay for these workers is their week's pay divided by the average number of hours they work in each paid week. You'll have an option to use 'rolled-up holiday pay'. This is where you pay the worker an additional amount on top of their normal rate of pay that represents payment for their holiday pay. The rate of rolled-up holiday pay must be 12.07% of their total earnings in the pay period. See the government guidance for more information.

What to include in the normal rate of pay

For the purposes of calculating holiday pay for the 4-week allocation of leave, the normal rate of pay must include:

  • Payments that are intrinsically linked to the performance of tasks a worker must carry out under the terms of their contract.
  • Payments that have been regularly paid to the worker in the last 52 weeks.
  • Payments for professional or personal status relating to length of service, seniority or professional qualifications.

Examples include:

  • Overtime – whether voluntary, compulsory and/or non-guaranteed (overtime worked if an employer requires it)
  • Commission
  • Standby and emergency call payments
  • Productivity, attendance or performance bonuses
  • Acting-up payments (a temporary increase in salary where a worker is asked to assume the duties of a higher-grade worker due to their absence)
  • Allowances (for performing certain tasks or doing them under certain conditions or times).

Carrying over untaken annual leave

There are special rules if workers are unable to take their statutory annual leave for the reasons set out below.

Sickness absence and annual leave

This applies to the 4-week allocation of leave only.

Workers continue to accrue (build up) this part of their statutory annual leave while absent from work due to sickness or injury, no matter how long the period of absence lasts. They can take their statutory annual leave at the same time as their sick leave and receive their normal rate of pay. Or, they can carry it over into the next leave year - but they must take it within 18 months, starting from the end of the leave year in which it accrued.

Workers can also choose to have their statutory annual leave changed to sick leave if their scheduled holiday coincides with them being sick or injured either just before taking their holiday or while on holiday. They must be allowed to arrange to take the statutory annual leave that they missed at a later date. If there is insufficient time for them to take this in the same leave year, then you must allow them to carry it forward into the next leave year.

Annual leave while on other forms of statutory leave

This applies to both allocations of statutory annual leave (i.e. the full 5.6 weeks). Employees continue to accrue their statutory annual leave while they are on another type of statutory leave, such as maternity, shared parental leave or adoption leave. They must be allowed to carry over those days into the following leave year. They will then need to take them by the end of that year.

Failures by you

This applies to the 4-week allocation of leave only.

Workers continue to accrue their statutory annual leave whilst leave was not taken as you failed to:

  • Accept they have the right to take paid holiday, such as if they've been wrongly treated as self-employed.
  • Give them a reasonable opportunity to take their leave or encouraged them to take it.
  • Inform them that if they don't take their leave by the end of the holiday year, they will lose it.

In each case the carried over leave must be used by the end of the first full leave year after you've resolved the issue.

Failure to comply

If you fail to provide your employee with paid annual leave, the sanctions are similar to those that were imposed for breach of rest entitlements as outlined above. Where you fail to provide payment for a period of annual leave or pay for untaken leave on termination of employment, the employment tribunal must order payment of the amount due to the employee.

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