Following your annual leave policy shouldn’t feel like solving a maths puzzle every time someone wants time off!
If you’ve ever found yourself scratching your head over holiday entitlements, wondering whether bank holidays count, or trying to figure out how to handle that person who always books Christmas week in January, you’re not alone.
Getting your leave policy right is important, not just for the legal reasons (though that’s important too) – it’s about creating a workplace where people feel valued, where taking time off doesn’t create drama, and where everyone knows exactly where they stand.
Plus, a brilliant leave policy can actually become one of your not-so-secret weapons for attracting and keeping great people.
This guide will walk you through everything step by step. We’ll cover the legal bits, share some practical tips we’ve picked up along the way, and help you create something that works brilliantly for both you and your team.
Ready to turn annual leave from a headache into a highlight? Let’s dive in!
The Basics of Annual Leave
So, let’s start with the basics. Annual leave (also referred to as Holiday Leave), is simply the paid time off that your employees are legally entitled to take each year. It’s different from sick leave, or those emergency “my boiler’s exploded” days. This is proper, planned, guilt-free time away from work.
In the UK, almost everyone who works is entitled to at least 5.6 weeks of paid annual leave per year. For someone working Monday to Friday, that’s 28 days, which includes things like Christmas and bank holidays if you want it to.
Here’s what’s quite nice about UK employment law: this entitlement kicks in from day one. You don’t have to wait a year to “earn” your holidays; they build up gradually from the moment someone starts working for you.
Now, you might be wondering about the difference between what you legally have to give (statutory leave) and what you choose to give (contractual leave). The legal minimum is your baseline, but many employers offer more. We’ve noticed that 25-30 days plus bank holidays is pretty common, especially if you’re trying to attract brilliant people in competitive industries.
People who feel they can properly switch off and recharge come back more productive, creative, and generally much happier! Plus, having a clear, fair annual leave policy means fewer awkward conversations, less admin confusion, and a much more contented team overall.
You should aim to treat annual leave as part of someone’s total package. Yes, salary matters hugely, but when someone’s choosing between job offers, generous holidays and a sensible leave policy can absolutely tip the scales in your favour.
Getting the Maths Right: Annual Leave Calculations Made Simple
The calculations are fairly simple:
Full-time employees are the easiest to work with. If someone works the same hours, five days a week (Monday to Friday), they get 28 days of annual leave (including bank holidays). Simple as that!
Part-time employees need a bit more maths, but it’s still straightforward. For part-time employees working a regular schedule – a fixed number of hours each week, evenly distributed across their working days (e.g., 4.5 hours Monday to Wednesday)- you simply multiply 5.6 by the number of days they work per week. So someone who works three days a week gets 16.8 days (which you can round up to 17 because nobody wants to track 0.8 of a day!). Someone working two days a week gets 11.2 days, and so on.
If a part-time employee works a fixed number of hours each week but these hours are not evenly distributed across their working days (e.g., 4 hours Mon-Thurs and 3.5 hours Fri), it’s best to calculate leave entitlement in hours. To do this calculation, you first need to understand the leave entitlement in days:
i.e. Number of weeks holiday X number of days per week worked on
E.g. 5.6 weeks X 5 days per week worked = 28 days holiday
Next, you can calculate holiday hours by:
Number of days holiday X average hours per day worked on
The average hours per day are calculated by:
Total number of hours worked / number of days per week worked
E.g. 28 days holiday X 4.5 average hours per day = 126 hours holiday
You should only round up on the final stage of the calculation. So someone on 4 days, whose holiday is calculated in days, will get 22.4 days holiday, rounded up to the nearest half day or full day (whichever is closest), i.e. 22.5 days.
Casual and zero-hours workers; this is where it can get tricky, but the rules changed in April 2024 to make things simpler with the return of the “12.07% method”, otherwise known as rolled-up holiday pay.
At the statutory minimum of 5.6 weeks of annual leave a year, this means 12.07% of the person’s hours worked are given back to them in paid annual leave. If you offer contractual or enhanced annual leave, however, the percentage will need to change to reflect this.
Essentially, for every hour someone works, they earn about 7 minutes of holiday time. Your payroll system can usually handle this automatically.
When does the leave year start? You’ve got some options here.
You can go with the calendar year (January to December), which is administratively simpler, an alternative 12-month period such as April to March or you could use anniversary years (starting from when each person joined). Calendar years mean everyone’s on the same cycle, but anniversary years can feel fairer for people who start mid-year.
For someone’s first year, their leave builds up month by month. So if someone starts in March and you use calendar years, they’d get 10/12ths of their full entitlement for that first year.
Quick tip to avoid common mistakes: Always remember to pro-rata for part-timers, don’t forget about people who start or leave mid-year, and be clear about whether bank holidays are part of your 28 days or extra (we’ll cover this next!).
The Bank Holiday Question: Included or Additional?
UK law doesn’t actually require you to give bank holidays as separate days off. Surprising, right?
The legal minimum of 5.6 weeks can include bank holidays. So technically, you could give someone 20 days of their own choice plus 8 bank holidays, and that meets the legal requirement of 28 days total.
Most employers choose one of these approaches:
Option 1: Bank holidays are included in your 28 days. This means if someone wants Christmas Day off, they use one of their holiday days (unless you’re open and they’re working anyway). This keeps things predictable cost-wise.
Option 2: Bank holidays are extra on top of 28 days of personal choice. So people get 36 days total—28 they can use whenever, plus 8 bank holidays. This is more generous and often goes down really well with your team.
Which should you choose? Well, it depends on your business and budget. If you’re usually closed on bank holidays anyway, giving them as extra days off feels generous, but means you lose another 8 days of work throughout the year for each colleague. If you’re open most bank holidays (like retail or hospitality), including them in the 28 days might make more sense.
Other businesses decide to find a middle ground—maybe Christmas and New Year are extra, but other bank holidays are part of the 28 days. The key is being clear about your approach so there aren’t any nasty surprises.
Ensure that your decision is written down clearly in your policy and contracts. Trust us, you don’t want the “but I thought bank holidays were extra” conversation happening in December!
Building Your Leave Policy: Key Components for Success
Let’s get into the nitty-gritty of what needs to be in your policy.
Who does this apply to? Start by being clear about which employees get what. Full-timers, part-timers, temps—spell it out so there’s no confusion. And mention when entitlements kick in (usually from day one, but some companies have different rules for different types of employees).
How much leave does everyone get? This is the big one! Be specific about annual leave amounts for different employee types, and explain how it builds up. Do people get it all on 1st January, or does it accrue monthly? Can unused days be carried over to the next year? If so, how many and for how long?
How does the booking process work? This is where you can save yourself loads of hassle by being really clear upfront. How much notice do you need? (Two to four weeks is pretty standard for planned leave.) Who approves requests? What happens if three people want the same week off? Are there any blackout periods when leave is restricted?
How do you keep track of everything? Whether you use a fancy system or a simple spreadsheet, explain how leave is recorded and how people can check their remaining days. Cloud-based systems such as Breathe HR make it really simple to calculate, request, approve, and track leave.
What about the tricky situations? Things like falling ill during annual leave (they might get those days back), emergency family situations, or what happens if someone wants more time off than they’ve got left.
Here’s some language you might find helpful: “Please give at least two weeks’ notice for planned annual leave. We’ll do our best to accommodate all requests, but during busy periods we might need to limit how many people are off at once.”
For emergencies, you could say: “We understand that sometimes life throws curveballs. For genuine emergencies, speak to your manager as soon as possible, and we’ll work something out together.”
The key is striking the right balance between being comprehensive and keeping it readable. You want people to understand and follow your policy, not file it away and forget about it!
From Policy to Practice: Making Your Leave System Work
Having a policy is one thing. Making it work smoothly in real life is where the magic happens! Here are some tips we’ve picked up for turning your leave policy from words on paper into something that really makes everyone’s life easier.
Getting everyone on board is important when you introduce a new policy or update an existing one. Don’t just email it out and hope for the best! Have a team meeting, walk through the key points, and give people a chance to ask questions. Real-life examples work wonders: “So if Sarah wants to book two weeks in July, here’s exactly how that would work…”
Making approval fair and transparent prevents so many potential conflicts. Have clear criteria (notice periods, business needs, staffing levels) and stick to them consistently. When you do have to say no to a request, explain why and try to suggest alternatives. “We can’t do the whole of August, but how about the first two weeks?”
Handling those tricky peak periods requires a bit of planning. If you know summer’s always busy, or December gets mad, let people know early in the year. Some businesses use a “first-come, first-served” approach, while others rotate who gets priority each year. Find what works for your team and stick with it.
Keeping good records isn’t the most exciting part, but it’s so important! Whether you use software or spreadsheets, make sure you can easily see who’s booked what, who’s got days left, and any carry-over arrangements. Regular check-ins help spot potential issues before they become problems.
Reviewing and improving your policy should happen at least once a year. What worked well? What caused confusion? Have employment laws changed? Is your leave policy still competitive? Don’t be afraid to tweak things based on what you learn.
Remember, good leave management is part of creating a workplace where people want to be. When employees feel their time off is respected and fairly managed, they’re happier, more productive, and much more likely to stick around.
And here’s a nice bonus: when you get annual leave right, it becomes part of your employer brand. People talk about workplaces that treat them well, and word gets around. Before you know it, you’re attracting better candidates because you’ve got a reputation as a good place to work!
Making It All Work Together
Creating an annual leave policy that actually works doesn’t have to be complicated. Start with the legal basics, add some common sense, and don’t forget to inject a bit of your company personality into the mix.
Remember, your annual leave policy is part of a bigger picture. It sits alongside all the other ways you support your team’s wellbeing and work-life balance. Whether that’s flexible working, health benefits, employee discounts, or just creating a culture where people feel appreciated, it all adds up to something special.
The best leave policies are the ones that feel generous while having clear boundaries, clear without being rigid, and fair without being complicated. If you’re starting from scratch, begin with the basics and build from there. If you’re updating an existing policy, listen to your team’s feedback and don’t be afraid to make changes that work better for everyone.
At the end of the day, supporting your team’s wellbeing—whether through time off, workplace perks, or other benefits—is one of the best investments you can make in your business. Happy, rested employees are productive employees, and productive employees help your business thrive.
If you’re thinking about how annual leave fits into a broader employee benefits strategy, you’re definitely on the right track. Combining fair leave policies with other perks and support can create a really compelling package that helps you attract and keep the best people.
Fancy a chat about how to create a brilliant employee benefits package? We’d love to help you build something brilliant for your team.
Quick Reference: UK Annual Leave Legal Minimums
✅ Statutory minimum: 5.6 weeks (28 days for full-time workers)
✅ Part-time calculation: 5.6 × days worked per week
✅ Irregular hours: 12.07% of hours worked
✅ Bank holidays: Can be included in the statutory minimum
✅ Notice period: No legal minimum, but 2-4 weeks is typical
✅ Carry-over: No automatic right (except in certain circumstances), but policies may allow some carry-over
Key Questions Your Policy Should Answer
- Who does this policy apply to?
- How much annual leave does each employee type receive?
- When does the leave year start and end?
- How much notice is required for leave requests?
- Who approves leave requests?
- Can unused leave be carried over?
- What happens during peak restriction periods?
- How is leave tracked and recorded?
- What are the procedures for emergency leave