POSTED: May 17 2024
The Importance of Annual Leave
From a productivity, practical & legal viewpoints

The Importance of Annual Leave

Holiday season is fast approaching, and your employees may be looking forward to their holidays, whether this is abroad or a ‘staycation’. The school summer holidays also mean that some employees may wish to take holiday in this peak season!

The careful management of holiday is important as employers wish to ensure that there continues to be adequate cover for operational purposes. However, and perhaps more importantly, to ensure that employees are not disappointed if holiday requests are rejected. If several employees wish to take holiday at the same or similar times, this can take some careful juggling and an element of mutual compromise as any holiday requests being rejected, or even holiday being cancelled can significantly affect team morale.

The Working Time Regulations, introduced in 1998 by the EU and integrated into UK employment legislation and has since evolved, focuses on breaks from work and minimum holiday was implemented to ensure that employees have time for rest and relaxation – a time to recharge!  This legislation has also been recently amended to include further responsibilities for employers to be aware of.

This legislation used the word ‘worker’ and so it isn’t just employees, it incorporates a number of employment statuses, and all workers are entitled to a minimum of 5.6 weeks holiday.

Some workers can feel too busy to take annual leave, or the worry of returning to a high workload can also make workers feel they cannot take annual leave. This has resulted in the total number of annual leave days taken dropping by 2.7 per cent in the last two years.

However, overworked workers who do not take their annual leave can have increased stress levels, reduced productivity, risk of burnout, and have a poor work-life balance. Research illustrates that using annual leave improves employee productivity by up to 40% and reduces the risk of sick leave by 28%. So, not only is using annual leave beneficial for your workers, it is also beneficial for your business as it ensures your team are at their best, and are the most productive version of themselves.

Legislation around holiday published on 1st April 2024 also now makes it a legal requirement to ensure that businesses do everything they can to ensure that workers take their holiday. The legislation states that a worker will be entitled to carry forward into the next year the leave that they should have been entitled to take if:

  • the employer has refused to recognise a worker’s right to annual leave or to payment for that leave
  • the employer has not given the worker a reasonable opportunity to take their leave and encouraged them to do so; or
  • the employer failed to inform the worker that untaken leave will must be used before the end of the leave year to prevent it from being lost

If an employer fails to do this, workers with regular hours may carry over up to 20 days of their leave, accrued but untaken for these reasons, and irregular hours or part-year workers can carry over all of their entitlement.

advo would urge employers to make arrangements to show that they have informed and encouraged all workers to take their holiday and it is made abundantly clear that untaken leave will must be used before the end of the leave year to prevent it from being lost. We would suggest communicating this in writing at regular intervals so tangible evidence can be provided. This could include communication mediums such as messages on payslips, regular email messages, alerts on any holiday booking system etc.

Please don’t just inform workers but actively encourage them to book their holiday.

Finally, in the spirit of holiday being for a period of rest and relaxation, it is also recommended that where workers have access to work emails on their mobile phones that they are encouraged to turn any email notifications off when on annual leave!

Holiday Pay

One thing to be extremely mindful of for employees is pay when an employee is on holiday.

Legislation has been interpreted by the courts and stated cases and precedent over the years provide the basis of how holiday pay is calculated. There has been numerous twists and turns, but legislation published on 1st April 2024 provides clarity that that workers should be paid their “normal” pay while on holiday. The concept of this being that a worker must not be at financial detriment when on holiday.

So, if a worker does regular overtime or receives commission which is intrinsically linked to their role, this must be taken into account and this must be calculated and paid as an average when the worker is on holiday. This is especially the case if regular paid overtime is worked.

There is significant risk is paying incorrect holiday pay. An employee can bring a backdated holiday pay claim to the Employment Tribunal within three months of the underpayment occurring and employees can claim for underpayments of holiday pay over a maximum period of two years.

So, if holiday pay has been underpaid across your business, there could be significant risk and financial impact.

This is a thorny issue and a complex area of legislation. Undoubtedly, stated cases and precedent will continue to guide the law and advo always ensure that all HR clients are informed of any changes and provide guidance to mitigate risk.

advo would recommend reviewing how your holiday pay is calculated and if there are any concerns identified, please contact the HR team at advo and we are always happy to help.


Article by Louise Herring, advo HR Adviser