Calculating annual leave for your employees

Who doesn’t love a holiday? As rewards for hard work go, they don’t come much more appreciated. That’s why correctly calculating and managing employee annual leave is so vital to morale and the psychological contract.

Get annual leave right, and it’s business as usual. Mess it up, and get ready for some serious grievances. Here are the key points to consider.

How much statutory and contractual leave do employees get?

Under UK law and the European Working Time Directive, all employees are entitled to at least 28 days (or 5.6 weeks) of paid annual leave. The amount is pro-rated for non-full-time staff. The 28 days includes the UK’s eight bank holidays.

Your employment contracts might include additional terms covering annual leave, such as:

• Additional days off for all staff
• Additional days off linked to the individual employee’s role or length of service
• Payment in lieu for annual leave not taken. For statutory annual leave, it’s only due when an employee leaves
• Rules for taking and accruing contractual annual leave while off sick or on maternity leave. Employees always accrue statutory annual leave in these circumstances.

Remember to take into account both statutory and contractual terms when calculating annual leave allowances.

Handling annual leave requests

One of the most difficult aspects of managing employee annual leave is dealing with multiple requests for the same dates. This is especially common during holidays like Christmas and in summer.

Not every employee is going get the holiday dates they want — which is why you need to treat all requests and consistently. If you have a written policy for leave requests, you can manage staff disappointment by clearly explaining the reasons why.

Your policy might:

• Set a minimum notice period for requesting leave
• Set fair rules for deciding who gets to take double-requested dates. You might use a first-come-first-served basis, or at Christmas take into account who got to take time off the previous year
• Use a public holiday requests calendar in the workplace, to keep the process transparent

Calculating annual leave allowance

Calculating an employee’s remaining annual leave allowance can involve some tricky maths. Each employee might have a unique start date, they might work an unusual number of hours per week, their allowance might differ based on their length of service, and so on.

Ideally, it’s best to have an IT-based solution that automates annual leave calculations. Your options include:

• A company software system with built-in tools for managing employee annual leave.
• A cloud-based HR web app, many of which offer free accounts or pay-monthly plans. Try searching online.
• Your own spreadsheet. This may be the simplest and best-value option for smaller workforces.
• The free holiday entitlement calculator on the Gov.UK website, which you can use for individual employees.

Now you can calculate and manage annual leave legally, fairly and with as few manual calculations as possible.