What is Holiday Entitlement? An Employer's Overview

This article was updated on 21st May 2024 to reflect changes to the UK's Working Time Regulations, which have been designed to simplify holiday entitlement and holiday pay calculations for UK businesses. You can find more details below.

Holiday entitlement might sound like a breeze. But in reality, it can be a nightmare for people teams to administer here in the UK with all the statutory requirements and different allowances involved. 

It’s not uncommon for people teams to field lots of questions from sun-craven employees. How much leave am I entitled to, and what will I get paid? Not only does this soak up valuable time, but it can be a lot to manage.

Having a solid system in place can make a world of difference. But let’s start with some basics - what exactly is holiday entitlement, and how does it work? 

What is holiday entitlement?

Holiday entitlement - also known as annual leave here in the UK - is the amount of paid holiday time employees legally have a right to each year. 

How much holiday an employee is entitled to will depend on a few factors, like whether they’re part-time or full-time (e.g. the number of days or hours they work) or whether they have additional agreements in place with you as their employer.  

As with any type of leave, the specific terms of the employee contracts will outline when and how your employees can take their holiday. 

What is the legal holiday entitlement in the UK?

In the UK, the minimum holiday entitlement is 5.6 times the number of hours or days a staff member works in a week. So, a full-time worker who works five days a week would be entitled to 28 days (or five days x 5.6). 

It’s important to note that 28 days is the maximum statutory entitlement an employee is entitled to. For instance, if you have employees working 6 or 7 days a week, their entitlement would be capped at 28 days (in other words, you don’t need to do the calculation). That being said, companies can choose to offer their employees more leave if they desire and could even provide unlimited paid time off (PTO) as a benefit (but this has some pros and cons).

New for 2024

The government has introduced reforms to simplify holiday entitlement and holiday pay calculations in the Working Time Regulations, which came into effect on 1st January 2024. These changes include:

• introducing a method to calculate statutory holiday entitlement for irregular hours and part-year workers

• introducing a way of working out how much leave an irregular hour or part-year worker has accrued when they take maternity or family related leave, or are off sick

• defining what is considered ‘normal remuneration’ in relation to the first 4 weeks of statutory annual leave (applies to regular workers only. For irregular workers, 'total pay' should be used).

• introducing rolled-up holiday pay as an alternative method to calculate holiday pay for irregular hours workers and part-year workers

We have set out how these apply to each section below. It's recommended that for each of the above points that employers communicate the changes directly with employees and ensure that employment contracts are updated.

New for 2024 - The way irregular hour and part-year workers accrue statutory holiday entitlement has changed

For leave years beginning on or after 1 April 2024, there is a new accrual method for irregular hour workers and part-year workers in the first year of employment and beyond. Holiday entitlement for these workers will be calculated as 12.07% of actual hours worked in a pay period. So for example, if an irregular hours worker worked 68 in a particular month, you'll need to calculate 12.07% of 68 to work out the amount of statutory leave accrued in this particular month.

It's worth noting that this 12.07% figure is based on the statutory minimum of 5.6 weeks, but employers can offer their employees more than this statutory minimum should they wish. In this case, a corresponding higher percentage should be used.

It also should be noted that the calculation of hours accrued should be rounded down to the nearest hour if the difference is less than 30 minutes, but up if 30 minutes or more.

In the case of an irregular hours worker taking maternity, family related or sick leave, the way to calculate accrued leave has also changed. Following the same principle as the calculation above, this new method now introduces a 52-week relevant period so employers can look back and work out an average of hours worked across that period. This will inform what period of leave should be deemed to have accrued during the period of absence.

The relevant period should include the day before the worker starts their maternity, family or sick leave, going back 52 weeks. If the worker has not worked for you for 52 weeks, this relevant period is shortened to the number of weeks the worker has worked for you.

How does holiday entitlement work?

Holiday entitlement will look different depending on the number of hours or days an employee works during the week. Let’s look at the most common examples of this.

For full-time workers

Full-time employees working five days a week will get the standard UK holiday entitlement of 5.6 weeks of annual leave every year. In other words, they have 28 days (5 days * 5.6 weeks) they can take as paid leave, at a minimum. 

Of course, as we’ve just seen, this is the maximum statutory entitlement available, so those working more days or longer hours in a week won’t automatically have a right to additional paid holiday.

For part-time workers

If an employee is on a part-time contract, then they must receive at least 5.6 weeks of paid holiday but on a pro-rata basis. 

What that means is part-time workers only get a portion of the full entitlement, adjusted for the number of days they work each week. So, if a worker is on a two-day-a-week contract, they’ll get 11.2 days of annual leave (2 days * 5.6 weeks).

Find out more about holiday entitlement for part-time workers. 

How is holiday entitlement calculated?

At a basic level, calculating holiday entitlement is pretty straightforward - you simply multiply the number of hours or days an employee works on average each week by 5.6 (as a minimum). 

That being said, certain things further complicate calculating holiday pay, such as dealing with staff on irregular hours or who have been off work. You can learn more about what to do in each of these scenarios in our post on calculating holiday pay. 

New for 2024 - defining what is considered ‘normal remuneration’ in relation to the first 4 weeks of statutory annual leave

From 1st January 2024, for regular workers only, the components which must now be included when calculating the 'normal' rate of pay for the first 4 weeks of statutory leave have been updated to include:

• payments, including commission payments, intrinsically linked to the performance of tasks which a worker is contractually obliged to carry out.

• payments relating to professional or personal status relating to length of service, seniority or professional qualifications

• other payments, such as overtime payments, which have been regularly paid to a worker in the 52 weeks preceding the calculation date.

For the remaining 1.6 weeks of statutory leave, the basic rate of pay is used to calculate holiday pay.

However, an employer can now choose to use the rolled-up holiday pay method to calculate holiday pay for irregular hours or part-year workers, whereby the entire amount of leave will be paid at the 'total' rate of pay (different to the 'normal pay' used for regular workers).

When does holiday entitlement reset?

Most businesses will choose to run their holiday year from January 1st to December 31st to align with the calendar year (though some companies may choose to align with the financial or tax year), and any holiday allowance (e.g. 28 days) will reset immediately after this. 

For example, let’s say your holiday year aligns with the calendar year, and you’ve got an employee with five days left of holiday by December 31st. That means their leave will reset on January 1st, so they’ll have 28 days available then. 

Can employees carry over leave?

Now, some businesses might choose to allow employees to carry over leave. In this case, the employee in the example above would have 33 days (28 days + 5 days carried over) available from January 1st. It’s important to note, however, that employees aren’t automatically entitled to carry-over (their working contract must state whether they do or not). The only exception to this is if the employee takes a long period of leave such as Maternity, Adoption or long-term sick leave. In the first two instances, the employee is entitled to carry over 5.6 weeks of annual leave, for long-term sick leave, it’s four weeks.

What if an employee has joined part-way through the holiday year? 

Usually, an employee’s leave allowance will start from their first month of employment. So if an employee joins your company mid-year, their holiday allowance should be pro-rated based on this (e.g. if a full-time employee arrives six months in, they should only be entitled to 14 days holiday, not 28 days).

What about bank holidays? Can I include these as part of the entitlement?

Good question! The short answer is it’s up to you as an employer. 

Some businesses have workers take bank holidays off as part of their annual leave entitlement. Others might pay for them in addition to their annual leave entitlement. The choice is up to your company.

When an employee decides to leave your company, their full statutory entitlement will need to be pro-rated. That includes both statutory leave days and bank holidays. That being said, you can still split entitlement between statutory and bank holiday days. 

How much notice do employees have to give to take leave?

Again, we can look to the UK Gov website for guidance here. According to them, employees should give their employer twice as much notice as the amount of time they intend to take off. So, if one of your employees wants to take one day off for a holiday, they should give you at least two days' notice right before this. 

But this guidance is pretty standard and could vary depending on what their work contract states (which overrides what the government says).

Setting up a holiday policy

A holiday pay policy pretty much does what it says on the tin - it’s a way for your organisation to manage how and when your employees take their holiday. Having a clear policy in place will not only clear up any confusion but will also reduce employee queries about their holidays. In addition, it can help lower the risk of holiday entitlement misuse. Add in a solid system to help you manage your company’s holiday entitlement (like payroll software, just saying), and you’ll be off to the races. 

To begin with, you’ll want to clarify a few things, like whether your organisation observes bank holidays (we discussed this earlier). You’ll also want to explain how much notice employees should give before planning and booking their holiday - again, as discussed before, you can vary this from standard government guidance as long as you make this clear in your employment contracts. You might even want to set up a holiday purchase scheme. 

You might also want to outline when employees can or can’t take holidays. For instance, you can require employees to take time off during bank holidays like Christmas or New Year if you choose to close your business on these days. 

In a similar way, you can restrict staff from taking days off during busy periods. Still, you don’t want to get in the way of workers taking their leave full stop - remember, workers have a right to holiday here in the UK. In fact, as an employer, you should do everything to encourage employees to take their annual leave. If you don’t, you’ll look bad in the eyes of UK law. If you ask employees not to take leave on specific days, you must give them a chance to take that leave at another time.