The SME's guide to holiday entitlement

Holiday entitlement can become a bit of a hot chestnut at times, especially if you aren’t fully aware of the law. So I have put together this brief guide to your rights as an employer and the rights of your staff. It answers many of the questions I am often asked about annual leave and should help you take the hassle out of holiday management.

Is there a standard holiday entitlement for employees?

Every worker, whether full or part-time, is entitled to a minimum of 5.6 weeks (28 days) annual leave each year inclusive of bank holidays. There is no opting out of the annual leave provisions. In other words, leave must be taken, with no option to pay in lieu except on termination of employment.

In addition to the statutory minimum, an employer can choose to include bank holidays as part of annual leave, but they do not have to be included. Those working full time (5 days’ a week) must receive 28 days’ paid annual leave per year. This is calculated by multiplying 5 days by the annual entitlement of 5.6 weeks.

Learn more: How to calculate holiday entitlement

Part-time workers are also entitled to a minimum of 5.6 weeks’ of paid holiday each year, although this may amount to fewer actual days of paid holiday than a full-time worker would get. For example: An employee works 3 days’ a week, therefore their leave is calculated by multiplying 3 by 5.6, which comes to 16.8 days’ of annual paid leave.

Learn more: How to calculate holiday entitlement for part time workers

This changes if the hours worked are irregular, as can be seen from the calculation used for employees with irregular hours detailed below.

How do I treat part days?

A worker’s annual holiday entitlement may include what are known as 'part days' (for example 11.2 days for someone working two days a week). These part days cannot be rounded down, but do not need to be rounded up to the nearest full day. An employer can, however, choose to do so if they wish.

Alternatively, an employer might suggest that a worker take a full day’s leave and just get paid for the part day the worker is owed. For example:

The part day could be taken off a day’s shift, so you leave early or come in late
The part day could be carried over to your next holiday year

How much notice must my staff give if they want a holiday?

Your employees must give you advance notice that they want to take holiday. This notice should be at least twice as long as the amount of holiday they want to take. For example, they should give two weeks' notice for one week's holiday.

Can I refuse my employees’ holiday requests?

An employer can refuse or cancel permission for a holiday as long as they give notice which is at least as long as the holiday requested. So to refuse a request for a week's leave, you would have to tell your employee a week in advance.

If you don’t want staff on holiday at particularly busy times for the firm, you can stipulate these dates in their contracts of employment. However, you can only do this if it doesn’t effectively prevent them from taking holiday at all.

If a worker states that they would like to take leave for a religious holiday (and this is rejected) you must be able to justify your decision by giving reasons. These reasons must be based upon the operational needs of the employer, rather than based upon any less favourable treatment of a religious worker, otherwise this could amount to religious discrimination.

It will always help you to have a clear policy concerning the timing of holidays and how requests are processed. Ultimately, holidays are to be taken at the discretion of the employer, so if you can justify your decision, then there should be no issue with denying a worker leave during a religious holiday.

Can I ask a worker to take certain specific days as holiday?

In addition to saying when a worker cannot take their annual leave, an employer can specify when some or all of a worker’s holidays must be taken. For example, you may need them to take some of their holiday over the bank holidays or you may want to shut down the whole company over Christmas.

You can stipulate these dates in your employees’ contract of employment, although this is not necessary and may just become normal company practice over time. Just remember that if you want to stipulate specific holiday dates for your workers, you must give them the same amount of notice as they are required to give you.

Learn more: How to manage enforced annual leave

How do I deal with staff wanting holidays at the same time?

A difficult situation to manage is where workers wish to take their holidays in the same week; this is most often the case during school holidays, half term weeks and over Christmas and New Year.

The best way to handle this is by having an annual leave policy which is thorough and:

Sets out the basis for approving holidays (this is typically on a first come, first served basis);
Limits holidays to two weeks unless there is an exceptional circumstance such as a honeymoon or wedding;
Specifies any particularly busy times for the company during which employees cannot take holidays.

Another good way to avoid problems in popular holiday periods is to ensure all staff have access to the firm’s holiday planner. This could either be in the firm’s HR software or on a wall chart in a common area. By providing this facility, it makes workers take responsibility to avoid clashing with other workers when booking their holidays.

Learn more: Managing summer holiday requests and clashes

Do I have to pay staff on the days they take as holiday?

How much holiday pay a worker is entitled to depends largely upon the hours the individual works, and their usual rate of pay:

Fixed hours and fixed pay (full or part time)

A week’s holiday pay is how much a worker gets for a week’s work.

Shift work with fixed hours (full or part time)

A week’s holiday pay is the average number of weekly fixed hours a worker worked in the previous 12 weeks at their average hourly rate.

No fixed hours (casual work)

A week’s holiday pay is the average pay a worker got over the previous 12 weeks (in which they were paid).

Shift and rota workers, whose pay varies because they work their normal hours at varying times and in varying amounts in different weeks, have their holiday pay calculated differently (as shown above). Their average weekly hours of work, in the preceding 12 weeks, are multiplied by their average hourly rate. The hourly rate of holiday pay is then calculated as above and includes any shift allowance which is payable.