It is beneficial to both your business and your staff if you manage holiday entitlement correctly.

Disagreements over holidays and holiday pay are common if entitlements are not clearly agreed upon and set out in writing. These disagreements could lead to a deterioration in your relationship with your staff and possible complaints to industrial tribunals.

In addition, almost all workers above school leaving age are entitled to statutory paid holiday entitlement, so you should be aware of what this means for your business and manage how it is worked out for each worker.

Advantages of managing staff holiday entitlement

Effectively managing staff holiday entitlement can bring several business benefits:

Staff motivation

Staff who can take regular holidays can feel more valued and become more motivated about their work, which helps them perform more effectively.

Reduction in stress and mistakes

Having a break from the workplace ensures staff are less prone to mistakes or accidents and less likely to suffer from stress because they have regular opportunities to rest.

Fair treatment

Having an annual leave policy and including paid holiday entitlement in employees' employment contracts ensures the rules and processes are clear to everyone. This will help you to take a consistent approach to annual leave across the business so that employees feel they have been treated fairly.

Prepare and plan for leave

Having an annual leave policy and appropriate procedures in place also minimises the opportunity for disputes. A worker is more likely to be granted an annual leave request if the appropriate procedure has been followed and they have given you sufficient notice of the leave so you can prepare for the absence.

Less sick leave and staff turnover

You should also experience a decrease in sick leave and staff turnover because staff feel more appreciated overall and are less likely to resort to sick leave when they need to take time off work.

Almost all workers above school leaving age - not just employees but also, for example, agency and casual workers - are entitled to 5.6 weeks of paid holiday per leave year (28 days for a worker working a five or 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.

Holiday entitlement: staff working a six-day week

The statutory paid holiday entitlement is capped at 28 days.

Although 5.6 weeks would equal 33.6 days for someone working a six-day week (5.6 x 6), because of the cap, staff working a six-day week are only entitled to 28 days' paid holiday. However, that is the minimum statutory allowance. If you wish you can increase the holiday entitlement under an employee's contract of employment.

Holiday entitlement and the contract of employment

You must set out an employee's paid holiday entitlement in their written statement of terms and conditions of employment.

This should enable them to work out their entitlement and pay for any untaken holiday if they leave. See the employment contract.

Workers not entitled to the statutory minimum paid holiday entitlement

The following types of workers do not have the right to benefit from the minimum paid holiday entitlement:

• The genuinely self-employed, who can take as little or as much holiday as they choose.
• Those whose jobs may conflict with the requirement to take annual leave requirements, eg the armed forces, the police, and those involved in civil protection (these workers have to rely on their contracts of employment for their rights to holiday).
• Workers in some sectors are excluded from the Working Time Regulations (Northern Ireland) 2016 because they are covered by separate regulations. The entitlement to annual leave of mobile staff working in the civil aviation sector, for example, is governed by the Civil Aviation (Working Time) Regulations 2004.

Carrying over unused paid holiday

A worker may wish to carry over unused holidays from the current leave year to the next.

Under European Union (EU) derived law, a worker must take at least 4 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 remain 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 can either carry it over or will receive pay in lieu for 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.

A worker's entitlement to paid annual leave starts on the first day of employment and is not subject to a minimum period of employment.

Holiday entitlement accrual

The Regulations permit an employer to operate a holiday accrual system for workers who are in their first year of employment (only). In practice, this means that a new worker will accrue one-twelfth of their annual holiday entitlement each month they are employed. This will apply from the start of each month.

Calculating holiday pay

For each week of leave accrued, workers are entitled to one week's normal pay. A week's pay is calculated according to the type of work carried out:

• for workers on fixed hours and pay, it equals the amount due for a week's work, averaged over the preceding 12 weeks
• for workers on fixed hours and variable pay (bonus, commission, or piece workers), it equals the average hourly rate (over the preceding 12 weeks) multiplied by the normal working hours in a week
• for shift workers, it equals the average weekly hours of work in the preceding 12 weeks at the average hourly rate
• for workers with no normal working hours, a week's pay is the average pay received over the preceding 12 weeks.

The 12-week reference period should be made up of 12 weeks in which pay was due to the worker. Any week in which no remuneration was payable to the worker should be discounted, as should any weeks where the employee was for any amount of time on sick leave, maternity leave, adoption leave, shared parental leave, parental leave, paternity leave, or parental bereavement leave.

If any weeks are discounted, ie, no pay was received for a particular week, or the worker was on statutory leave as outlined above, earlier weeks should be considered until you get as close to 12 weeks as possible. In these circumstances, the maximum period you can go back is 24 weeks.

If the worker has been employed for less than 12 weeks, holiday pay is based on the number of complete weeks for which the worker has been employed.

Calculate holiday pay for hourly paid staff

To calculate the average hourly rate, you only count the hours where the worker was working and the pay that related to those hours.

Staff should receive the same pay during any holiday period as they would if they were at work. Therefore, when calculating holiday pay for the 4 weeks of paid holiday leave derived from European law, an employer must include payments which are intrinsically linked to the performance of tasks the employee is obliged to carry out under the terms of the contract. This includes commission, bonuses, regularly paid allowances, and payment for additional hours the employee normally and repeatedly works. Other payments, such as overtime payments regularly paid to the employee, should also be included, as should payments for professional or personal status relating to length of service, seniority, or professional qualifications. Employers may decide to extend this calculation to the full 5.6 weeks' statutory paid holiday entitlement, but they do not have to.

However, case law has suggested all paid annual leave should be treated as a composite whole where each day of a holiday a worker takes includes, on a fractional basis, the various elements making up their total holiday entitlement (whether they be contractual or statutory). Employers should take this into account when making holiday payments where they are only applying the law on overtime, commission, allowances, bonuses, etc (as outlined above) to the 4 weeks of holiday derived from European law to ensure underpayments of holiday pay are avoided.

The question of how much pay a worker is due during a period of holiday can be complex and has been the subject of several court judgments. Further information is available from the LRA Workplace Information Service on Tel 03300 555 300.

Calculate holiday entitlement for your employees.

Payments for untaken statutory holiday

In the UK, the statutory annual leave entitlement is 5.6 weeks. A worker must take at least four weeks' paid holiday per leave year.

What a worker does with the remaining 1.6 weeks depends on their employment contract.

For example, you could allow them to carry those 1.6 weeks into the next leave year or state that all 5.6 weeks must be taken by the end of the leave year.

However, you cannot make a payment in lieu of any days that remain untaken. The only time you can make a payment in lieu of the statutory holiday entitlement is when the contract of employment terminates, and the worker has accrued entitlement to holidays and is unable to take them before they leave.

Payments for untaken contractual holiday

At the end of a leave year, you may find you have an employee who has some untaken contractual annual leave, ie, annual leave over and above the statutory minimum of 5.6 weeks.

Depending on their employment contract, the employee may be entitled to either carry over the untaken days or receive a payment in lieu of those untaken days.

When to pay workers their statutory holiday pay

Workers must receive their statutory holiday pay at the time that leave is taken.

It's, therefore, unlawful not to pay a worker while they are on holiday and pay them an allowance as part of their wages or salary instead - a system known as rolled-up holiday pay.

There are various ways of working out the holiday entitlement for workers who don't have regular working arrangements or patterns.

Part-time workers

Paid holiday entitlement is calculated pro rata for part-time workers.

For example, if a member of staff works three days a week, they are entitled to 16.8 days (5.6 x 3).

Shift workers

It is sometimes easier to calculate holiday entitlement as shifts.

For example, if a member of staff works four 12-hour shifts followed by four days off, the average working week is 3.5 12-hour shifts. So 5.6 weeks' holiday is 5.6 x 3.5 = 19.6 12-hour shifts.

For other shift patterns, it may be easiest to calculate according to the established repeating pattern.

More irregular working patterns: calculating holidays in hours

Annualised hours

If a member of staff works annualised hours, you need to calculate how many hours a week they work on average over the whole year.

For example, if a member of staff works a total of 1,600 hours a year, or 34.48 hours a week over 46.4 weeks of the year, the holiday entitlement is 5.6 weeks x 34.48 hours a week = 193.09 hours of holiday for the year.

Compressed hours

For someone working compressed hours, for example, a 36-hour week over four days instead of five, their annual holiday entitlement is 36 hours x 5.6 weeks = 201.6 hours of holiday for the year.

Rather than taking a day's holiday, they would take the number of hours that they would have otherwise worked on that day (ie for 36 hours worked over four days, they would take nine hours' holiday for each day otherwise worked).

Calculating no fixed hours contracts (casual work, including zero-hours contracts)

To calculate the average hourly rate, only the hours worked and how much was paid for them should be counted. Take the average rate over the last 12 weeks.

A 'week' usually runs from Sunday to Saturday. Only use another 7-day period (like Thursday to Wednesday) if that's how a worker's pay is calculated.

You can also get further information from the LRA Workplace Information Service on Tel 03300 555 300.

Part days

Calculations may result in part days, eg 22.4 days for someone working four days a week. In some cases, it may be easier to work the holidays out in hours.

If this is the case, you could:

• Allow the worker to leave early or arrive late one day. For example, for someone working an eight-hour day taking 0.4 of a day's holiday, you could allow them to leave after working for four hours and 48 minutes (480 minutes x 0.6 of a working day = 288 minutes) or allow them to arrive three hours and 12 minutes late (0.4 of a working day).
• Round the entitlement up to the nearest full day - or half day if this is still easy for you to administer. You cannot round entitlements down.
• Allow the worker to carry the part day over into the next leave year (and then perhaps round up to the nearest full day).
• Pay them for a part day. However, you can only do this if the worker's paid holiday entitlement is more than 5.6 weeks, as you cannot pay a worker in lieu of an untaken statutory holiday - see calculating and paying holiday pay.

Term-time or part-year workers

Recent case law has determined that workers employed on a continuous contract throughout the year, and who work for varying hours during certain weeks of the year, such as those who work only term time, are entitled to 5.6 weeks of leave each year. This entitlement applies even though there are some weeks in the year when they do not work.

In such instances, holiday pay is calculated by averaging the pay received during the 12 weeks before the commencement of their leave. If there are weeks during the 12-week period where no pay was received, these weeks are disregarded, and the employer must count back to include a total of 12 weeks in which pay was received.

Although there may be times when a part-year worker receives a higher payment than a full-time worker, this is compliant with the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations (Northern Ireland) 2000, as the part-time worker is not being treated less favourably. There is no legislative provision to prevent part-time workers from being treated more favourably.

Employees taking statutory maternity, adoption, paternity, parental leave, and parental bereavement leave will continue to accrue statutory paid holiday and, in many cases, any contractual holiday entitlement. If, by the end of the current holiday year, an employee has been prevented from taking part or all of their holiday leave entitlement due to being on one of these types of statutory leave, they have a right to carry over up to 5.6 weeks untaken statutory holiday leave into the new holiday year.

Holiday entitlement and maternity/adoption leave

Employees on maternity or adoption leave continue to accrue both statutory and any contractual paid holiday during both ordinary and additional maternity/adoption leave.

A statutory paid holiday cannot be taken at the same time as maternity/adoption leave. When you are planning for the maternity/adoption leave, you may wish to discuss taking any outstanding holiday and perhaps delay the start of their maternity/adoption leave.

Alternatively, it may be possible for them to take holiday at the end of the maternity/adoption leave period.

If a new holiday year starts, the employee is on maternity/adoption leave and holidays haven't been taken, the employee has a right to carry over up to 5.6 weeks of untaken statutory holiday leave to the new holiday year.

When you are planning, you should be aware that maternity and adoption leave cannot start later than the date of the child's birth or placement for adoption, so an early birth or placement could shorten the amount of annual leave the employee is able to take.

Read more on maternity leave and pay and adoption leave and pay.

Holiday entitlement and paternity leave

Employees continue to accrue their statutory and any contractual paid holiday entitlement while they are on statutory paternity leave.

Read more on paternity leave and pay.

Holiday entitlement and shared parental leave

Employees continue to accrue their statutory and any contractual paid holiday entitlement while they are on shared parental leave.

Read more on shared parental leave and pay.

Holiday entitlement and parental leave

Employees continue to accrue their statutory paid holiday entitlement while they are on parental leave. They will also continue to accrue contractual holiday entitlement if this is provided for in their contract of employment.

See parental leave and time off for dependants.

Holiday entitlement and parental bereavement leave

Employees continue to accrue their statutory paid holiday entitlement while they are on parental bereavement leave. They will also continue to accrue contractual holiday entitlement if this is provided for in their contract of employment.

See statutory parental bereavement leave.

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.

A best practice example is as follows:

An employer has both part-time and full-time staff. In a particular year, there are ten bank/public holidays. The full-time staff work a five-day week, Monday to Friday. There are also part-time staff working a two-day week, some on Monday and Tuesday, some on Wednesday and Thursday, and some working varying days.

The employer allows all workers a day off in respect of all bank/public holidays falling on a day they would ordinarily have worked. Furthermore, for those part-time staff working Wednesday and Thursday (or varying days) who would never (or rarely) work on the day a bank/public holiday falls, the employer allows them a pro-rata entitlement of days off in lieu based on the number of days they work, by way of best practice. They, therefore, receive two-fifths of the ten-day entitlement.

This approach ensures that all workers enjoy a share of the benefits received by full-time staff.

Read more on employing part-time workers.

Bank and public holiday dates

When the Christmas and New Year public holidays fall on 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 upon 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.

See bank and public holidays in Northern Ireland.

Special bank holidays

Dates of bank holidays can be changed or extra holidays declared to celebrate special occasions. For example, there was an extra bank holiday on Monday 8 May 2023 to mark the coronation of His Majesty King Charles III.

A worker's minimum paid annual leave entitlement is 5.6 weeks. There is no statutory time off for bank holidays and public holidays. However, you may choose to include these as part of that worker's entitlement.

Where a worker's contract states they are entitled to the statutory minimum annual leave, an extra bank holiday would not increase their paid holiday entitlement.

However, if a worker had a contract that entitles them to 20 days' annual leave plus all bank and public holidays, they should be entitled to the additional bank holiday as annual leave.

Workers must give you notice that they wish to take leave. You can agree on 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. Restrictions could:

• be stated in the employment contract
• have built up via custom and practice
• be negotiated with trade unions 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 holidays 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 from 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.

Workers will also be able to carry over up to 4 weeks of holiday leave where:

• the employer fails to recognise a worker's right to paid holiday leave
• the employer fails to give the worker a reasonable opportunity to take holiday leave or to encourage them to do so
• the employer fails to inform the worker that any holiday leave not taken by the end of the holiday leave year, which cannot be carried over, will be lost

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:

• became 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

For more information about sick pay, see understanding statutory sick pay.

Carrying over annual leave that is left untaken due to sickness

If a worker is unable to take all their statutory annual leave entitlement within a leave year because of illness, they will be entitled to carry forward up to 4 weeks of the unused statutory entitlement to the next leave year. Holiday leave carried over in this way must be taken by the end of the period of 18 months from the end of the holiday leave year in which the entitlement originally arose.

If you need further advice on sick leave and/or annual leave, you should contact the Labour Relations Agency Workplace Information Service on Tel 03300 555 300.

When your workers leave a job - even if you have dismissed them without notice for gross misconduct - they must receive pay for any statutory leave they are entitled to in the current leave year but have not taken.

This entitlement is not subject to a minimum period of employment.

Formula to calculate pay due to workers who resign

You can work out the pay due using the simple formula (A x B) - C, where:

• A is the total holiday entitlement for the year
• B is the fraction of the year to the date of leaving
• C is the amount of holidays already taken

Example: Part-time worker

For example, a part-time worker works three days per week. Like all workers, they are entitled to 5.6 weeks of paid annual leave.

They leave a job seven months into the leave year, having taken eight days off. This is the equivalent of 2.66 weeks (8 ÷ 3).

Applying the formula above: 5.6 x (7 ÷ 12) - 2.66 = 0.61 weeks' leave to be paid in lieu. 

Note that, if you need to, you should round this figure up to prevent underpayment.

If you pay a worker on a daily basis, you can also work out their outstanding holiday entitlement in days.

Example: Full-time worker

For example, a worker working five days per week is entitled to 5.6 weeks per year, the equivalent of 28 days (5.6 x 5).

They leave a job three months into the year, having taken four days off.

Applying the formula above: 28 x (3 ÷ 12) - 4 = 3 days' leave to be paid in lieu.

Note that, if you need to, you should round this figure up to prevent underpayment.

You need to get the worker's signed agreement to make a deduction from the final payment to them for any leave taken over their entitlement.

Calculate pay when workers fail to give the correct period of notice

Holiday pay would usually sit separately from notice entitlement and would be earned up to the date the worker leaves your employment.

However, if a worker leaves employment without giving the correct period of notice, they could be in breach of their employment contract if the contract contains a clause stating what will happen if this occurs eg deductions will be made from earned pay.

Calculating leave pay due to workers who you dismiss

If you dismiss a worker, they have the right to be paid for leave accrued during their period of employment, no matter how short it was.

To work out B when using the formula above, you need to know the worker's termination date.

If you dismiss a worker with notice, the termination date is the date the notice period expires.

If you dismiss a worker without notice, the termination date is the date you summarily dismissed the worker.

An employee's written statement of employment particulars should contain information to enable them to calculate their entitlement to accrued holiday pay when they leave.

Taking annual leave during the notice period

A worker may wish to take some or all of their outstanding annual leave as part of their notice period. This should be treated the same as for any other holiday request - taking into account your usual procedure for authorising annual leave. Read more on taking holiday - notice periods, restrictions and sickness.

You can also insist by giving appropriate notice, or because it is clearly expressed in the contract of employment, that a worker takes any holiday owed to them as part of their notice period.

If a worker takes part of their paid leave entitlement during their notice period, you may reduce their notice pay by the amount of holiday pay, provided it is in respect of the same leave year.

The majority of your workers are legally entitled to paid holidays. The following top tips will help you to successfully manage each worker's holiday entitlement.

Tips for employers to manage staff holiday entitlement

1. Calculate holiday entitlement

A worker's statutory paid holiday entitlement starts on the first day of employment and is 5.6 weeks per year (28 days for a worker working a five or six-day week) - see holiday entitlement and statutory holiday pay.

2. Consider irregular hours

Ensure that you work out holiday entitlement for any staff who don't have regular working arrangements. These can include part-time workers, shift workers, and casual workers - see calculating holiday entitlement for atypical workers.

3. Include in employment contracts

Set out your employee's paid holiday entitlement in their employment contract to avoid any disagreements - see the employment contract.

4. Consider bank and public holidays

You do not have to give staff paid time off for bank or public holidays, but ensure that you include this in your employees' contracts. If you allow a worker time off for bank and public holidays over a significant period of time, be aware that it may become an implied term of their contract, even if it is not written in the contract of employment - see pay and time off on public and bank holidays.

5. Agree notice periods

Workers must give you notice if they wish to take leave. You can agree the notice period with them and you should set this out clearly in writing - see taking holiday - notice periods, restrictions, and sickness.