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Why you need an annual leave policy
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  3. Why you need an annual leave policy

A robust, legally compliant annual leave policy, setting out how your business manages requests for annual leave, is something all organisations should have.

A good policy will let your employees know everything they need to do and can expect around requesting annual leave. It will also document the steps you have taken to establish fairness and consistency, and your rights as an employer, which is all extremely valuable written evidence, should an employee ever challenge your approach.

What to include in an annual leave policy?


Your holiday policy should refer employees to their employment contract for their particular holiday entitlement.

When the holiday year runs

You should indicate when the holiday year runs in your organisation. This might be 1st January – 31st December, or it can be a 365-day period of your choosing.

How holiday entitlement will be calculated if an employee starts or leaves part-way through a holiday year

Usually, holiday entitlement will be calculated on a pro-rata basis rounded up to the nearest half day. This should also be stated within employment contracts for clarity.

Procedure for requesting annual leave

For example, do they need to email their line manager with the dates they would like to take off, or input them into your HR software?

You should also specify how far in advance employees should request leave.

How much leave can be taken in any one period

If longer periods of leave will be granted for exceptional circumstance, you should outline the procedure to follow when requesting this.

Whether employees will be required to take specific days off in the year

For example, if the business will be closed during the period between Christmas and New Year you will need to indicate that you require staff to take annual leave over this period.

How fairness will be achieved

You should state that individual requests will be balanced with the operational needs of the business and inform staff whether approval for specific dates will be determined on a first come first served basis.

Set out the staffing levels you will need to maintain, so it is clear how many people and from which departments can take time off over the same period. Also indicate if any handover period will be required between consecutive bookings. This way you have something in writing to fall back on if you need to refuse a leave request in order to maintain adequate staffing levels.

It’s a good idea to advise staff in your annual leave policy that they should not book a holiday unless the request has been approved, and that you will not be responsible for any costs incurred if a holiday is booked before it is approved and is subsequently rejected.

You should also inform staff of any measures you might take to ensure fairness across teams during particularly popular periods such as the school holidays, such as checking with colleagues before approving a request.

Rules around carrying over holiday

Your policy should state how many days of annual leave, if any, you will allow employees to carry over into the following annual leave year.

If they have been unable to use up their leave due to a period of statutory maternity, paternity, adoption or shared parental leave you must allow them to carry this leave over into the following year.

Holiday calculations on termination of employment

Your policy should let staff know how you will calculate any remaining holiday allowance on termination of their employment.

You should indicate that any holiday accrued but not yet taken for that year will be paid in lieu.

If the employee has already taken more holiday than they’ve accrued for the year, then it’s important to indicate in your policy if you intend to deduct payment for these days from their final pay.

Get help with employment policies

While this is the basic outline of what to include in an annual leave policy, every business is unique, and often additional clauses are required depending on the business.

Annual leave is also governed by employment law, so any holiday policy you write must comply with these rules.

As getting it wrong can be so costly, we always advise employers seek professional HR advice when writing their employment policies and contracts to make sure they are legally compliant and not discriminating against any employees.

To find out how our HR consultants can help you with creating an annual leave policy that’s tailored to your business’s needs, or review any existing policies, call 0300 444 165 or email info@citrushr.com.


The content of this blog is for general information only. Please don’t rely on it as legal or other professional advice as that is not what we intend. You can find more detail on this in our Terms of Website Use.

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