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The Full Guide to Carrying Over Annual Leave

employees focused on carrying over annual leave

Carrying over annual leave isn’t simply better for business, it’s a legal responsibility in the UK. So, what do you do when an employee hasn’t taken all their annual leave in a year? Allow us to break it down for you.

Here’s what you need to know about the process of carrying over annual leave and the legalities involved.

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What Is Annual Leave?

Annual leave is paid time off (PTO) granted to employees as a legal right. In the UK, almost all workers are legally entitled to a minimum of 28 days—or 5.6 weeks—of paid holiday per ‘leave year’.

Paid holiday is also known as statutory leave entitlement, or annual leave, and applies to:

Those 5.6 weeks of paid holiday comprise two lengths of time: Four weeks under Regulation 13 and 1.6 weeks under Regulation 13A of the Working Time Regulations 1998 (SI 1998/1833).

Typically, the four weeks of annual leave can’t be carried over into the next year, but the 1.6 weeks can, as long as there’s a written agreement between the employee and employer stating so.

Depending on the employer, a worker’s annual leave may include bank holidays. Employers can also provide workers with additional leave on top of the legal minimum.

When Can Workers Take Their Leave?

Workers are supposed to take their annual leave within the ‘leave year’ designated by their employer.

A leave year can comprise any 12-month period. While a typical leave year runs from January 1st to December 31st, it could also begin on the first day of a worker’s employment term and end on the one-year anniversary date.

For example, if a worker’s first day at a company was March 7th, 2021, their leave year would start on that day and end on March 7th, 2022.

How Employees Accrue Annual Leave

A worker begins accruing their entitled annual leave on their first day of employment. They may also accrue holiday entitlement while on maternity leave, paternity leave, adoption leave, shared parental leave or another type of statutory leave from work.

These rights are in place for furloughed employees as well. Furloughed employees can continue to accrue their annual leave (and any other holiday they’re entitled to) during their furlough period, as per their employment contract.

Some organisations follow an accrual system, where workers earn a portion of their annual leave throughout the first year of their employment. Essentially, they earn one-twelfth of their annual leave each month until they reach their first work anniversary.

From then on, their annual leave allowance remains the same—unless it’s increased or decreased by their employer due to a change in their position or contract. If a worker leaves their organisation before using all of their accrued statutory holiday entitlement, the employer must compensate them accordingly.

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How is Annual Leave Calculated?

Below, you’ll find some basic calculations you can follow to determine an employee’s annual leave allowance based on their employment status.

You can also calculate annual leave entitlement for a full leave year or partial leave year using this government-provided calculator.

To calculate the annual leave allowance for a full-time employee, multiply the typical number of days they work per week by the amount of paid holiday they receive per year in weeks.

Example: Kelsey works five days a week and has 6.6 weeks of paid holiday available to him every year.

5 (days worked per week) x 6.6 (weeks of paid holiday) = 33 days of annual leave per year.

Part-time workers are entitled to 5.6 weeks of paid holiday, in proportion to how many hours they work per week. To calculate a part-time worker’s annual leave allowance, multiple the number of days they work per week by 5.6.

Example: If Kim, a part-time employee, works three days a week, she would receive 16.8 days of annual leave per year (3 x 5.6 = 16.8).

If Kim’s employers offered more than the standard 5.6 weeks of paid holiday, her annual leave would be calculated in proportion to that amount.

If a worker doesn’t have a set amount of hours they work per week, you may consider them a casual worker.

A casual worker—also known as a zero-hours worker—works for an organisation on an ad-hoc basis and isn’t permanently on the payroll, but they’re not self-employed. These workers are entitled to a pro-rated minimum of 5.6 weeks’ annual leave after they reach one full leave year with the company.

There are no clear government guidelines on how to convert casual workers’ annual entitlement into days or hours, which would better reflect their employment status. However, one common approach to calculating holiday entitlement for casual workers is to base it on the average number of hours worked over the 12-week period before their leave.

Another common method is the 12.07% method, which is used to determine how much holiday entitlement a casual worker earns per hour.

Example: Sarah is a casual worker and is entitled to 5.6 weeks of paid annual leave per year. In the past week, she’s worked 18 hours. Here’s how to determine how much annual leave she’s accrued during that week:

5.6 (weeks of entitled paid leave) / 46.6 (number of remaining weeks in a year) = 0.12017 x 100 = 12.07%.

This tells us Sarah accrues holiday entitlement at 12.07% per hour.

12.07% of 18 (hours worked) = 2.1726 hours of holiday accrued.

Sarah’s employers could then use this calculation to track her holiday accrual and ensure she reaches her minimum entitlement. It’s important to note that employers cannot round-down the amount of leave their workers receive, but they may round up.

Deducting Holiday From Carried-Over Leave

When an employee carries annual leave over to the next year, their employer should deduct their holiday from the amount that expires first.

Example: Sam has one week of annual leave that he’s carrying over into 2022. He now has a total of 6.6 weeks of annual leave (5.6 weeks + one week). When Sam books a week-long holiday, it should be deducted from the one-week carry-over, not the 5.6 weeks of new entitled leave.

How Annual Leave Is Carried Over

Carrying over annual leave outside of the entitled 5.6 weeks is a privilege. While some employers may allow their workers to carry all of their unused annual leave into the next year, others don’t. In other words, if a worker doesn’t use up their allotted annual leave in one leave year, they lose it.

There are some exceptions, though. Legally, a worker can carry the entire amount of their annual leave over to the next year if they were unable to take it due to maternity, paternity or adoption leave. If a worker wasn’t able to take their annual leave due to sickness, they can carry up to 20 days over to the next leave year.

Some employers may limit how much leave an employee can carry over into the next year. Most commonly, that limit is five business days.

Employers may also set an expiry date for any leave that’s been carried over from the previous year. For example, employees may have to use their carried-over leave within the first three months of the next leave year.

Example: Jim’s employer gives him 30 days of paid annual leave per year, with no restrictions on carried over leave. By the end of the 2021, Jim had only taken 25 days of annual leave. So, those remaining 5 days could carry over to the next year, giving him 35 days of annual leave for 2022.

Covid-19 And Annual Leave: What Changed?

In March of 2020, new emergency legislation (The Working Time (Coronavirus) (Amendment) Regulations 2020) was passed to help businesses protect their workers from losing out on their statutory holiday entitlement due to the effects of Covid-19 by providing more flexibility around the matter.

This legislation ensures workers who were unable to take holiday due to ‘reasonably practicable reasons’ related to the coronavirus can carry over up to four weeks of annual leave over their next two leave years.

The government has defined what ‘reasonably practicable’ factors an employer should consider when determining if a worker could or could not take leave due to the effects of the pandemic, including:

  • Whether the business has faced a significant increase in demand due to coronavirus that would reasonably require the worker to continue to be at work and cannot be met through alternative practical measures.

  • The extent to which the business’s workforce is disrupted by the coronavirus and the practical options available to the business to provide temporary cover of essential activities.

  • The health of the worker and how soon they need to take a period of rest and relaxation.

  • The length of time remaining in the worker’s leave year, to enable the worker to take holiday at a later date within the leave year.

  • The extent to which the worker taking leave would impact on wider society’s response to, and recovery from, the coronavirus situation.

  • The ability of the remainder of the available workforce to provide cover for the worker going on leave.

Some workers may choose not to take their annual leave because they can’t travel internationally, due to pandemic restrictions. But since that isn’t considered a ‘reasonable practicable’ reason for an employee not to take their leave, it isn’t covered by the legislation.

How Does Your Business Track Annual Leave?

Did you know that HR software can automatically help with carrying over annual leave for every employee? Learn more about absence management with Personio, and book a demo today to see it in action and in conversation with an expert.

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