A guide to holiday entitlement for UK employers

Holiday entitlement refers to the legal requirement for employers to give their staff a certain number of fully paid holidays. 

An employee’s holiday entitlement depends on how many days or hours they work and whether they have any additional agreements in place with their employer. The specific terms of leave should be clearly outlined in each employment contract and discussed with every employee as part of their induction process. 

Holiday entitlement is normally split into two main categories: statutory holiday entitlement required by law and contractual holiday entitlement which may be offered as a bonus at the discretion of the employer. 

In the UK, the minimum legal requirement for holiday entitlement is 5.6 weeks of paid annual leave. This is equivalent to 28 days for a full-time employee working a 5-day week. This is often referred to as "statutory leave." This entitlement is made up of two parts: 

• 4 weeks (20 days): This is derived from EU law and cannot be replaced with payment in lieu, except when the employee is leaving. 
• 1.6 weeks (8 days): This is additional UK statutory leave. 

Different types of contracts and employees will receive a different number of days off. However, the legal requirement stays the same. The calculations change depending on the type of employee, including: full time, part time, and zero-hour.  

One of the primary factors with holiday entitlement is the type of employment contract under which your staff are working. Full-time, part-time and zero-hours workers all have different statutory rights and leave entitlements, and these differences should be fully understood by line managers and staff alike.  

To calculate an employee’s holiday entitlement, you must first know their overall allowance, as well as how many days they work per week. For full-time workers, this is usually 28 days entitlement and five working days per week.  

If you’re unsure about how many days leave an employee is entitled to, make sure to check the annual leave calculator on the GOV.UK website. 

Pro-rata holiday entitlement is based on the amount of the holiday year they’ve worked. It is a way of calculating holiday entitlement for employees who work part-time or those who start or leave a job part way through the year. 

Pro-rata calculations are important as they ensure that employees receive a fair proportion of holiday entitlement compared to full-time colleagues. 

Part-time employees are entitled to the same proportion of holiday as their full-time counterparts. For example, if a full-time employee gets 28 days of holiday, a part-time employee working half the hours would be entitled to 14 days. 

Employees who start or leave a job during the year are entitled to a proportion of holiday based on the number of days or weeks they worked in that year. 

For workers with irregular hours, employers might need to calculate an average working week over a set period to determine their holiday entitlement. The calculation for holiday entitlement is done by multiplying the employee’s working hours by 12.07%. This piece of legislation applies to casual workers, zero-hours contracts, and those with variable working patterns. 

Term-time workers are also entitled to pro-rata holiday. As they work only during school terms, their holiday will be less than full-time employees. 

How to work out statutory holiday entitlement for full-time staff 

Full-time workers who work five days per week must receive at least 5.6 weeks of holiday each year, which works out to 28 days’ paid holiday as a minimum.

Please note that statutory holiday entitlement is limited to 28 days. For example, employees working six days a week will still only be entitled to 28 days paid leave by law.  

How to work out statutory holiday entitlement for part-time staff 

Employees working part-time must receive at least 5.6 weeks of paid leave, although their total holiday entitlement will depend on how many days or hours, they work each week. It is calculated on a pro-rata basis. For example, if they work three days a week, they must get at least 16.8 days (about 2 and a half weeks)’ leave per year (3 × 5.6).  
  
Any employees working irregular hours are also entitled to paid time off depending on how many hours they work. This is referred to as holiday accrual, which we discuss later on in this article. 

How to work out holiday entitlement for agency staff

Agency workers will sometimes be required to cover business needs. This can be due to extremely busy periods with deadlines and projects, or during times of holidays for a large number of staff. In these situations, it’s advisable to review your absence management policy and how you approve holidays. Leaving yourself short in these situations can have a detrimental effect on your business. 

Agency workers are entitled to a minimum of 5.6 weeks of paid holiday per year. The Agency Workers Regulations 2010 provide additional rights to agency workers, including the right to the same holiday entitlement as comparable employees after a 12-week qualifying period. This means that if the company you're working at offers its employees more than the statutory minimum holiday, you'll be entitled to the same amount after 12 weeks in the same role. 

Not all new starters will begin their employment on the first day of the employer’s leave year, so when you calculate holiday entitlement for a new starter you must figure out how many months remain in the current leave year. Then, using the formula of total entitlement ÷ 12 (months) X number of months, you can calculate their total entitlement per month.  

For example:  

Julie is a new starter who joins your company full-time at the end of September. There are three months remaining in the leave year which runs from January to December. 28 days ÷ 12 (months) X 3 (months) = 7 days entitlement remaining for the year.  

When it comes to calculating the holiday entitlement of a leaver, you can use the total number of days between the start of your leave year and the employee’s leaving date ÷ 365 days in a year X 100 to work out the percentage of full-holiday allowance entitlement for the employee.   

For example:  

Johnny joined your company on 1st January and has a leave date of 31st March. There is a total of 90 days between Johnny joining and leaving the company. 90 days ÷ 365 days in a year X 100 = 25%.   

Johnny had a holiday allowance of 28 days, meaning he is now entitled to 7 days holiday as 25% of 28 days = 7 days. To work out what the employee is owed, you must then deduct any bank holidays or leave that has already been taken from the 7 days accrued. Should any holidays remain at the time of the employees leave date, these should be paid in their final salary.

Holiday accrual 

Whilst most businesses choose to have a holiday entitlement of 28 days each year, some employers opt for a holiday accrual system. But what is holiday accrual, and how does it work?  

Holiday accrual sees employees build up their holiday pay entitlement from the moment they join the business, accruing a proportion of their holiday entitlement monthly.  

For example, when an employee joins a business using a holiday accrual system and has worked there for a total of six months, they will have accrued 50% of their holiday entitlement for the year.  

The calculation for holiday accrual is straightforward. Simply calculate how many days an employee has worked (including bank holidays), then divide that number by twelve.  

For example, if an employee works 25 days a month you would divide 25 by 12, leaving a holiday entitlement of 2 days leave per month.  

For employees with holiday entitlement remaining at the end of the year, there are several ways in which they can calculate their holiday pay accrual, these include: 

• The number of weekly days or hours worked  
• An average number of hours worked during a set period of time  
• The regular shift patterns of an employee  

Rolled up holiday pay 

Those managing irregular or part-year workers may adopt the common yet controversial practice of rolling up holiday pay. Rolled up holiday pay ‘rolls up’ an employee’s basic salary and holiday pay into one package, meaning that the employee will receive an enhanced hourly rate, to compensate for the fact they will not receive any holiday pay.      

Whilst rolled up holiday pay is legal for both irregular and part-year workers in the UK, there can be some serious risks for businesses using this method of pay. To learn more, download our informative guide to rolled up holiday pay. 

Under the Working Time Regulations 1998 Act, the first 4 weeks of statutory holiday entitlement cannot be rolled over. However, depending on the policies that your business sets, employees may be able to rollover 1.6 weeks of their holiday entitlement. They’ll need to utilise this within the next year. 

Bank holidays  

Bank holidays do not have to be given as paid leave, although employers often choose to include bank holidays as part of an employee’s statutory holiday entitlement.  

Maternity, paternity or sick leave 

Employees have a statutory right to accrue holiday entitlement during maternity leave, paternity leave and sick leave, which can then be carried over into the following year’s leave entitlement. Again, this is capped at 5.6 weeks of unused days, or 28 days if the employee usually works five days per week. 

Employers looking to incentivise staff and reward loyalty may decide to offer more paid leave than the legal minimum; however, it’s worth noting they do not have to apply all the rules that apply to statutory holiday entitlement to the additional contractual leave.  

For instance, a member of staff may need to work for a company for a certain period of time before they become entitled to the extra holiday entitlement. This can be a great way to engage employees beyond pay and drive long-term retention.  

Employers may also choose to offer holiday carryover as an extra benefit to their staff, the details of which should be clearly communicated to each employee in their employment contract. 

Another benefit that employers can offer is Holiday Trading through a salary sacrifice scheme. Employees can have the opportunity to buy or sell holiday. Beyond the benefit of extra time off for health and wellbeing, employees can save on NI and tax costs. The employer also can save on NI costs, which is especially pertinent given the rise in NICs announced in the 2024 Autumn Budget. To find out how your business could save £900 per employee per year through salary sacrifice schemes, download our report ‘How employee benefits can help offset NI and wage increases’.

Holidays provides employees with the opportunity for rest and rejuvenation, which is pivotal in ensuring their productivity and engagement. In fact, taking leave can boost wellbeing and productivity by up to 40%.  

But productivity aside, employees who regularly use their holiday entitlement can also benefit from:   

• Reduced stress levels   
• Improved mood  
• Greater mental and physical health  
• A boost in morale  

Recognising the importance of holiday should be part of a comprehensive strategy to improve mental health and wellbeing in the workplace. If businesses are actively encouraging employees to take and enjoy their time off, it demonstrates their commitment to fostering a supportive and healthy work environment, ultimately leading to increased retention rates and a more motivated workforce.  

We know there are many benefits of leave for employees, but what happens when an employee forgets to take their statutory holiday entitlement?  

As well as facing burnout, lower job satisfaction and motivation, reduced creativity and increased health issues, having a workforce who do not make use of their holiday entitlement can lead to increased sick leave which can be costly to your business.  

So, with the stakes high, can you enforce an employee to take their holiday? 

In short, yes. You can request your employees to take their statutory holiday entitlement, with the minimum 4 weeks being part of this. However, the request should be reasonable, should not discriminate, and fall in line with the rules outlined below. 

To enforce your employees into taking their holiday entitlement, you need to: 

• Legally outline the rules relating to when an employee can take their leave along with any restrictions, within a workforce agreement.  
• Ensure the workforce agreement is readily available to all employees, whether this be including it within an employee's contract or your staff handbook  
• Ensure all rules are clear, justified, fair and consistent.  

It is also common practice for companies to have periods of company-wide shutdowns due to significantly reduced workload, this usually happens during the festive period. In cases such as these, when organisations must manage leave of absence, it is good practice to note this within company documents such as an employee’s contract or staff handbook, making it clear that this enforced leave is included within their holiday entitlement.  

Businesses can also refuse employee’s holiday requests, but only if they have a valid reason to.   

By following these leave management best practices, you can ensure that your workforce is taking the correct measures to deal with enforced leave correctly.   

How to enforce leave 

Firstly, it is important to ensure you have clearly outlined your policies on enforced leave within company documentation. This will not only ensure that you’re legally covered but can also help to ensure employees do not feel blind-sided or resentful when they are forced to take periods of leave. 

Regular communications such as emails are a great way to remind and encourage employees to use their full holiday entitlement and see periods of enforced leave as a positive.

Staff holiday booking systems provide a great way to monitor and manage employee annual leave and holiday entitlement. With the use of automated systems, holidays can be approved automatically and you will have complete visibility of planned and upcoming leave, allowing you to spot those who may need a little extra push to take time off. 

There are several important steps to handling any complaints about holiday entitlement. Whatever the issue may be, the employee in question is likely to be fairly upset about the matter. The first step is to listen and understand what the complaint is regarding. Employees may have disputes about several things: 

• Entitlement issues like calculation errors 
• Request and approval issues like refusal of holiday and short notice of changes 
• Accrual and carry-over problems including enforce holiday 

Addressing these issues in your absence management policy is a great way to prevent these problems from arising. However, they may still pop up and treating them effectively is beneficial for the continued morale and commitment of the employee. 

Initial contact 

Acknowledge the complaint and allow the employee to voice the full extent of the dispute. Also take notes and ask any clarifying questions to fully understand the employee’s perspective on the matter. 

Gather information 

Once you have the notes, check the employee’s contract, holiday records, company policies, and the statutory holiday entitlement. It’s beneficial to have a Staff Holiday Booking System in place that keeps all this data available to both you and the employee. If required, speak to any relevant HR personnel. 

Determine the correct holiday entitlement 

The firs port of call for determining holiday entitlement is the employee contract. If that is unclear for any particular reason, depending on the dispute, consult the company policy or statutory entitlement. If they are disputing leave based on starting or leaving part-way through a year, work out the pro-rata holiday entitlement. 

Communicate the decision 

Explain the decision clearly and sympathetically, whilst referencing the relevant documentation, like the employee contract or company policy. During this step, it’s beneficial to address any further concerns the employee may have. If there are options for how to clarify and sort the situation, try to explore those to maintain a general sense of harmony. 

Follow up 

Keep detailed records of the dispute and of the communication with the employee. It is advisable to also follow up with the employee to check they have understood the process and decision. If you need to escalate the matter further, accurate record keeping will be important. 

Having an effective policy in place for holiday entitlement means that every employee ends up being treated fairly. Whether they be full-time, part-time, or any other worker, they know that their allowance is in line with the legal requirements. In turn, this can promote a positive company culture. An effective way to implement this management is through a Staff Holiday Booking System, as a part of a wider HR suite.