Annual Leave

24 Jun
by Donna Obstfeld, posted in Annual Leave, Blog, Contract of employment, Employees, Employers, Holidays, people management   |  1 Comments

Many of us look forward to a summer holiday and a well-earned break. We’re just about to come into that time of year when employers will start to see the ebb and flow of their workforce as staff start to take their main holiday.  It’s important to remember that annual leave is much more than just a benefit; it’s essential for the long term health and well-being of your staff.  As an employer, you probably recognise that many of your employees are working long and hard, perhaps a reflection of the current recession and harder times.  Therefore it’s important and in fact essential that you ensure your team take their annual leave.  A holiday gives a much needed boost to often tired workers.  When working long hours over extended periods of time, mistakes are made and accidents can occur.  It is often the case that motivation and morale can also be low.  By encouraging staff to take time off for perhaps a week’s holiday, preferably two means that those run down batteries can be re-charged!  It is generally a common theme that people return with new-found inspiration, refreshed and motivated which in turn really can energise and benefit a business.

The entitlement to paid annual leave is governed by the Working Time Directive Legislation. This provides all full time employees with a minimum of 28 days leave per year, including public and bank holidays. This is then pro-rated for part time employees – and this is where the complication for many starts.

We find that one of the biggest on-going issues for our clients is calculating part time annual leave entitlements.  It can be complicated so here we provide you with some easy to understand golden rules to enable you to choose the method most appropriate for your business needs.

Rule 1: You cannot treat part time employees any less favourably than your full time staff. Entitlements can be pro-rated, but the base benefit must be the same.

Rule 2: Work out your full time weekly hours as this is the anchor point. If you have two very different categories of staff such as those at head office and those in retail outlets, you may choose to have different full time hours for each category.

Rule 3: Calculate the FTE (full time equivalent) of each member of staff based on your full time hours for that category.  Here’s an example: If your full time hours are 40 and someone works 30 hours, they are a 0.75 FTE if your full time hours are 35 and someone works 30 hours, they are a 0.86 FTE.

Rule 4: Following Rule 3 work out leave entitlement. As both annual leave and public & bank holidays are pro-rated, assuming a full time employee has 28 days, in the first example the employee would have 21 days leave. In the second example the employee would have 24 days. The main thing to note with this first calculation is that the day is a normal length working day for that category i.e. 8 or 7 hours if it is a 5 day working week, Monday to Friday.

Rule 5: Perhaps you are managing annual leave in hours? In some organisations, where staff work a different number of hours on each day, it may be easier to manage annual leave in hours, so that in this example both employees have 168 hours leave (first employee 21 days x 8 hours) and (second employee 24 days x 7 hours). In this case if they take a day off and they would only normally work 6 hours on that day, then it is 6 which is deducted not 7 or 8 for a whole day.

Rule 6: Be clear on the Bank Holidays! Bank holidays notoriously cause a problem. The key is to record every absence whether it is a personal holiday or a public holiday. So if the employee usually works 8 hours on a Monday and Monday is a bank holiday, you deduct 8 hours (or 1 day) from their leave entitlement. If the employee does not usually work on a Monday, there is no change to their leave record.

Rule 7: Sunday working; where an employee works short days on a Sunday, it is important to ensure that they don’t use all their annual leave entitlement to take every Sunday off! Therefore it is essential that your policy is well written restricting this practice so that may mean no more than 6 Sundays per year and that your managers are trained to manage holiday absence efficiently and ensure adequate cover for the business.

Rule 8: Where an organisation has staff who do not work regular weekly hours, managing holiday accurately is much harder. We recommend accruing holiday based on actual hours worked on a weekly basis. The accrual rate is determined by your full time hours and normal leave entitlement. Then for every hour worked, holiday is accrued. If the person works every week (or most weeks) then they need to be able to take their leave. If they are a temporary member of staff or only work periodically, then it may be better to pay them each month for the holiday they have accrued. This should show as a separate line on their pay slip.

Getting holiday right is important, legally, morally and for the sake of the business. We recommend you ensure you have a clear policy which supports your business needs and culture.  Understand what you have to do and clarify what you want to do. Communicate it to staff and if in doubt, seek advice. Ensuring staff use their annual leave entitlement is for the long term health of your business as well as for good morale. Oh, and don’t forget to lead by example. You are no good to your business if you are exhausted.  On that note, have a good holiday; we’re off to book ours!

For more information, or for help with drafting your annual leave policy, contact us on 01923 504100 or at

Tagged , , ,

One Response to Annual Leave

  1. Pingback: August 2012 | DOHR limited

Leave a Reply