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How to make an Annual leave policy

Use an annual leave policy to clearly set out your business’ approach to holidays and holiday pay.

Recently reviewed by Lauren Delin, Solicitor.

This annual leave policy was last reviewed on 31 March 2022.

Use this annual leave policy:

  • if you or your business employ staff in England, Wales or Scotland

  • to ensure that staff know when they can take annual leave and how to request it

  • to explain staff’s holiday pay entitlement

This annual leave policy template covers: 

  • how much annual leave staff are entitled to and how annual leave entitlement accumulates

  • the process for requesting annual leave

  • holiday pay entitlement 

  • when annual leave can be reallocated as bereavement leave or family leave (ie parental or adoption leave)

  • when annual leave can be taken

  • whether annual leave can be carried forward into the next annual leave year

  • rules for taking annual leave near the start of employment 

Annual leave is the time an employee is allowed to take off work to have a holiday. It is important that staff are encouraged to use their full annual leave entitlement (ie all the days of annual leave that they are allowed) so that they can rest. An annual leave policy sets out an employer’s rules and procedures surrounding annual leave to ensure that employees are clear on all entitlements and expectations.

Employers are legally required to let employees take at least 5.6 weeks’ paid holiday per year, including bank holidays, calculated in proportion to the hours actually worked (ie pro rata). This holiday entitlement also applies to staff who work casual or irregular hours. As a result, you should make sure that you have an annual leave policy in place if you employ anybody. For more information, read Employee holidays and How to calculate holiday entitlement.

You can make an annual leave policy using this template. You can then download and print or digitally store your policy. You should ensure that all staff know about the policy and know where they can get a copy of it. If you have an employee handbook, you should include your annual leave policy in it. 

You should also ensure that staff know who to talk to if they have any questions or concerns about annual leave.

Under the Working Time Regulations 1998, staff in the UK are entitled to at least 5.6 weeks of paid holiday per year (pro rata). For full-time workers this means 28 days. For part-time workers this is calculated in proportion to the number of hours they work. 20 days of the holiday entitlement come from UK legislation, the remaining 8 from European legislation. Employers can choose to offer their employees more than 28 days paid holiday. 

Employers can also decide whether staff can take bank holidays off in addition to their UK annual leave entitlement. In England and Wales there are usually 8 bank holidays per year. In Scotland there are usually 9.

For more information, read How to calculate holiday entitlement.

Full-time, part-time and casual staff are entitled to paid holiday. Businesses are not required to give self-employed contractors annual leave and holiday pay.

For more information about the status of staff, read Consultants, workers and employees. If you need help determining a staff member’s status, you can Ask a lawyer.

If an employee is unable to use their whole entitlement during the relevant annual leave year they may be able to carry over (or ‘carry forward’) some of their entitlement to use in the next annual leave year(s). 

If they were unable to take a holiday because they were on long-term sick leave or family leave (ie parental or adoption leave), they can carry over at least 4 weeks of their entitlement. A rule was introduced during the Coronavirus (COVID-19) pandemic, allowing employees to carry over at least 4 weeks of holiday time if they were unable to use it due to being ill with Coronavirus or because they had to continue working due to the pandemic. 

Employers can allow staff to carry over annual leave entitlement for other reasons too, eg because they wanted to finish work on a particular project before taking annual leave.

If an employee has unused annual leave entitlement when they finish their employment with you, they must be paid any remaining holiday pay they are entitled to when they leave. Alternatively, employers can require the employee to use their remaining entitlement during their notice period.

Ask a lawyer for advice if:

  • you employ agency workers or contractors and you are unsure what annual leave they are entitled to

  • you want to set different annual leave rules for different employees

  • this policy doesn’t meet your needs

This annual leave policy is governed by the laws of England, Wales and Scotland.

Other names for Annual leave policy

Holiday policy, Holiday statement, Annual leave statement, Annual leave policy guidelines, Annual leave procedure, Company holiday policy, Holiday policy for employees.