Carrying over accrued holiday pay

Annual leave is a vital component of work-life balance, but understanding the rules around carrying over unused accrued holiday can be complex as can working out the holiday pay rate.

This blog explains the regulations regarding holiday carryover, recent changes, and best practices for both employers and employees.

Understanding holiday entitlement in the UK

Under UK law, most workers are entitled to 5.6 weeks (28 days) of paid holiday per year. This can include public holidays, depending on employment contracts. This entitlement is governed by the Working Time Regulations 1998, with some important updates in recent years.

Basic rules for holiday carryover

The standard position in UK employment law is that workers must take at least 4 weeks of their statutory annual leave within the leave year.

The remaining 1.6 weeks can be carried over to the next leave year if the employer agrees. Additional contractual holiday (beyond the statutory 5.6 weeks) may be carried over according to the terms of employment

Exceptions to standard carryover rules

Several circumstances allow for extended carryover:

1. Sickness Absence

If a worker cannot take their holiday due to sickness, they can carry over up to 4 weeks of unused leave. This leave should ideally be
taken within the next leave year, but can be taken within 18 months from the end of the leave year in which it accrued.

2. Maternity, paternity, adoption, and parental leave

Workers on these types of family-related leave cannot take holiday whilst on leave, but continue to accrue holiday. Any unused holiday due to these absences can be carried over to the next leave year.

Implications for holiday pay

When holiday is carried over:

• The rate of holiday pay should be the same as if the holiday had been taken in the original leave year
• Upon termination of employment, workers are entitled to payment for any untaken statutory holiday, including carried-over leave
• Employers can consider making a payment in lieu of the worker taking the holiday

Best practices for employers

• Clear policy documentation: Establish and communicate a clear holiday policy that addresses carryover provisions
• Regular tracking: Maintain accurate records of holiday entitlement, usage, and carryover
• Encourage holiday use: Promote a healthy work culture by encouraging employees to take their full entitlement within the leave year
• Consider flexible options: Some employers allow limited carryover with deadlines for using carried-over days
• Address long-term absence: Develop specific provisions for managing holiday accrual during extended absences

Advice for employees

1. Know your rights: Familiarise yourself with both statutory entitlements and your specific employment contract
2. Plan your leave: Try to schedule holidays throughout the year to avoid last-minute rushes
3. Communicate early: If you foresee difficulties using your full entitlement, speak with your employer as soon as possible
4. Document everything: Keep records of holiday requests, approvals, and any agreements regarding carryover
5. Seek advice: If disputes arise, consider consulting ACAS, a union representative, or an employment law specialist

Managing holiday carryover effectively requires understanding the legal framework, maintaining clear policies, and fostering open
communication between employers and employees. While the default position limits carryover, various exceptions exist to protect workers’
rights in specific circumstances.

By approaching holiday management proactively, both employers and employees can ensure compliance with legal requirements while promoting well-being and work-life balance.