Holidays and how to stick to the letter of the law

Apart from pay, one of the most valued parts of any employee’s package is holiday. However, the rules on pay and holiday entitlement are complex, and it is easy for an employer to make genuine mistakes and for an employee to misunderstand their rights.

The current legal position

The right to be paid annual leave is set out in the Working Time Regulations 1998 (WTR). This legislation implements the EU’s Working Time Directive into UK law. Under the WTR, every “worker” – which includes someone who works for an employer, but more casually – is entitled to 5.6 weeks’ paid holiday each year (WTR regulations 13 and 13A). For a full-time, five day per week worker, that equates to 28 days.

This 5.6-week period is made up of four weeks of EU-derived leave and 1.6 weeks of additional UK leave. Employers can choose to include bank holidays within the 5.6 weeks, or to grant this as additional time on top through the employment contract.

Notably, leave entitlement starts from the first day of employment. No length of service must be completed before someone qualifies for paid annual entitlement.

Recent developments

At the start of April 2024, the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 came into force and brought clarity and reform to the law on holiday entitlement.

A week’s pay for holiday under these regulations now include payments, including commission payments, intrinsically linked to the performance of tasks that a worker is obliged under their contract to carry out; payments for professional or personal status relating to length of service, seniority or professional qualifications; and payments, such as overtime payments, which have been regularly paid to a worker in the 52 weeks before the calculation date.

The rules allow accrual for irregular hours and part-year workers on a percentage basis. This would especially impact part-time nurses, locums and support staff. For these workers, holiday entitlement is no longer based on weeks of leave like other staff, but now is based on hours worked, and holiday accrues automatically at the end of each pay period – whether that is weekly or monthly.

The rate of pay is 12.07% of the actual hours worked in that pay period. This figure equals 5.6 weeks’ leave spread over a full year of work. Employers can either pay when leave is taken, or pay a 12.07% top up each pay period, termed “rolled-up holiday pay”.

The law now officially allows rolled-up pay, provided that the holiday pay element is clearly shown and calculated correctly.

How holiday pay should be calculated

Holiday pay must reflect the pay the worker would have received had they been at work.

Consequently, fixed-hours workers receive their normal weekly pay, while variable-hours or variable-pay workers should have holiday pay based on the average pay over the previous 52 weeks, excluding unpaid weeks (WTR regulation 16A).

The 2024 amendments confirm that “normal remuneration” includes regular overtime, commission, and regular bonuses linked to performance.

How leave is calculated and taken

Holiday entitlement can be calculated by two ways: accrual and pro rata.

Full-time workers accrue five days/week. This translates to 5.6 (weeks) times five (days), giving a total of 28 days.

Part-time workers are given leave pro rata; for example, a three day a week worker gets three days times 5.6 weeks, which means 16.8 days of leave.

In contrast, irregular or zero hours workers accrue leave at 12.07% of hours worked (5.6 weeks/46.4, the number of weeks a full-time worker typically works in a year). Leave normally accrues evenly through the leave year.

Carry over

As a rule, holiday must be taken in the same year.

However, carry over is permitted where the employer agrees and where the worker was unable to take leave because of sickness, maternity or other statutory leave.

Payment in lieu

When an individual leaves employment and unused statutory leave remains, the worker must be paid for it (WTR regulation 14). Employers cannot require staff to forfeit accrued statutory leave at the end of their employment.

It is also important to note that an employer cannot simply pay staff for unused statutory holiday instead of allowing them to take it during employment. This is only lawful when the employment is ending. Paying “in lieu” of leave during the employment relationship breaches the WTR, because workers must have the opportunity for rest. In practice, this means that it is important for employers to be able to track leave balances accurately, even for part-time or locum staff.

Managing holiday requests

While workers have a clear right to take their 5.6 weeks’ paid annual leave, employers can regulate when leave is taken.

Notice rules

Under the WTR, an employee cannot just demand to take leave and they must give the employer notice.

In essence, an employee must give notice at least twice the length of the leave requested; for example, two weeks’ notice for one week’s leave, as per WTR regulation 15(4)(a).

However, an employer can refuse or require leave to be taken at certain times by giving counter-notice equal to the length of the leave requested. Employers can also impose their own notice procedures by policy or contract, provided they do not prevent workers from taking their statutory entitlement.

Reasonable refusals

It is lawful for an employer to reasonably refuse leave if, for example, too many other employees are on leave at the same time, business cover would be inadequate, or it falls within a designated “blackout” or “restricted” period (December in retail being a good example).

However, refusals must be consistent and not discriminatory. Employers should also allow for the leave to be taken at another reasonable time.

Policy

It is useful for an employer to have a written holiday policy that sets out how and when leave can be requested, including any notice requirements, how overlapping requests are prioritised, any blackout or peak-time restrictions, and how public holidays are treated.

Sandwich leave

Sandwich leave is not a legal term, but refers to the practice of employees booking short periods of leave before and after weekends or bank holidays to maximise time off; an example would be taking leave Friday and Tuesday around a bank holiday, enabling the employee to gain five consecutive days off for the price of two.

From an operational standpoint, this can leave an employer short of cover – especially around public holidays. While it might irritate employees, employers can manage the timing of leave through fair, transparent rules. They could, for example, codify advance notice requirements which demands more notice for leave adjacent to public holidays; say, one month’s notice for bridging days. They could also put in place rotation or fairness rules by operating a rota, so staff take turns having popular periods off.

Alternatively, an employer could encourage early bookings and set deadlines to spread leave more evenly through the year.

Summary

The area of law on holidays is complex and often leads to disputes.

Taking time to understand the principles will pay dividends in the long run.

• This article appeared in Vet Times (10 March 2026), Volume 56, Issue 10, Pages 16-18