Holidays: Use Them or Lose Them
holidays use them or lose them

Holidays: Use Them or Lose Them

Every employee should know how much annual leave they have, and when they can and can’t take holidays. While we may not ask this in a job interview, we certainly should during our induction. Previously, we’ve talked about carrying over annual leave. In this month’s blog, we’re going to talk about these holidays, and your right as an employer and employee.

Let us start at the beginning … the Working Time Regulations 1998 entitles all employees and workers to 5.6 weeks per annum (calculated on a pro rata basis for part time workers). This is made up of:

  • 4 weeks from Regulation 13 from the Working Time Regulations
  • 1.6 weeks form Regulation 13A from the Working Time Regulations.

Many organisations include the 8 Bank Holidays in the 28 days entitlement.

The purpose of paid holidays is to ensure that employees and workers get enough rest to keep healthy; both physically and mentally.


Use them or lose them – carrying over holidays

At the end of the holiday year (as laid out in the contract of employment and the holiday policy) it is standard that any accrued but untaken holidays are lost.

Employers can agree to carry over holidays; However, this can only be any holidays over the legal minimum of 5.6 weeks. Or, Holidays over 4 weeks if there is a relevant ‘workforce agreement’ for the 1.6 weeks that allows it). This could include additional holidays as outlined in the employment contract.

In some cases, this causes a rush at the end of the holiday year to take leave. This rush can leave some employees disappointed if the business can’t agree the leave requests.

How can we avoid this?  Some companies will structure this into monthly or quarterly reviews with their staff to ensure they put requests in. This can help avoid disappointment whilst helping to promote a work life balance, reducing stress and corporate burnout.  It is important that companies communicate a reminder to their employees: Time is running out to book your holidays!

If you choose to allow your staff to carry leave over into the next holiday year, take into account the following:

  • Exceptional circumstances only
  • Implementing a policy
  • Restricting how many days can be carried over
  • Deadline to using carried over leave to be taken by

Carrying over holidays COVID-19

In 2020 the government introduced a law allowing any employees and workers who, due to the COVID-19 pandemic, were unable to take their full holiday entitlement during the holiday year, to carry over up to 4 weeks of their statutory holiday in to the following 2 holiday years.

Some reasons why an employee may have been impacted by Coronavirus and was not able to take their holiday:

  • Self-isolating or being too ill to work
  • Having to continue working and couldn’t take holidays due to workplace demands
  • Having been on furlough leave and couldn’t reasonably take off their full holiday entitlement

Are there any other circumstances where annual leave can be carried over?

Sick leave and holidays carry over:

If an employee’s period of long term sick leave extends into the next holiday year, or if there is not enough time left in the current holiday year to make it practicable for them to take their remaining holiday entitlement, these can be carried over as unused holiday entitlement to the following holiday year –  however, this is limited to the 4 weeks of the statutory entitlement.   Any annual leave not taken within 18 months of the end of the holiday year in which it accrues (whether or not you have returned to work) will be lost.

Maternity and holidays carry over:

The law clarifies that employees are entitled to both time-off for maternity leave and their annual leave rights.  Holiday entitlement must be planned in addition to maternity leave.  As maternity leave can last up to 12 months it is likely that holidays will have been accrued and not taken during the holiday year and therefore can be carried over into the next holiday year.


Communicating Holiday Carry Over

Employers who choose to allow employees to carry leave over should ensure that it is clearly laid out in the Holiday Policy.  Include areas such as the maximum number to be allowed (take into account this must be above 5.6 weeks entitlement) and can include a period of time that they must be taken before losing them, subject to normal business rules on annual leave approval.

Also include a section on COVID-19 law relating to the carrying over of 4 weeks’ due to circumstances impacted due to the pandemic.

Both the Sickness Absence and Maternity Policies should include sections on the carrying over of holidays to ensure fair and consistent application.


Can We Exchange Holidays?

Yes, some companies allow their employees to buy and sell their annual leave if they wish to take shorter or longer periods of holiday.

If you choose to do this, make sure that you have a policy in place and be aware that an employee cannot sell holidays if it results in them having less than the statutory minimum of 5.6 weeks as provided in the WTR’s 1998.

When agreeing to buying additional holidays make sure you have a signed agreement with your employee with their express agreement. This will ensure you have evidence of this in case the employee disputes a deduction in their wages.

It is at the company’s discretion to offer these benefits.

Case Law 

In this section we can talk about the case of Lyons vs Mitie.

Lyons was employed under a zero hours contract and had nine days’ annual leave remaining. As of 6th of March he had no further shifts scheduled. On 6th of March, he requested to take these holidays before his holiday year ended at the end of March. This was refused as the employer suggested that Lyons did not put in the request with a reasonable amount of notice (4 weeks) as stated in his contract of employment. He then requested payment in lieu for the remaining nine days before the end of the leave year. On 1 April, he discovered the holiday pay had not been paid and raised a grievance.

Lyons resigned and brought a tribunal claim for unfair dismissal and outstanding holiday pay.

The employment tribunal dismissed both the constructive unfair dismissal claim and the holiday pay claim. Lyons appealed to the Employment Appeal Tribunal (EAT).

The questions put to the Employment Appeal Tribunal were: do holiday notice requirements supersede the need for employees to take their annual leave within the holiday year? Is an employer legally permitted to allow the employee to take their holidays before the holiday year, even when they request it just before the year finishes?


The EAT held that the case should be held by another tribunal for rehearing.  This was on the basis that the EAT held that the initial tribunal had not considered fully the notice requirements for taking annual leave under the contract and to consider whether contractual rights were breached.  The EAT did however state that the right to statutory annual leave is not absolute in that it is subject to notice requirements and conditions for entitlement.

It concluded that the notice to take leave should not be operated by an employer in an unreasonable, arbitrary or capricious way to deny entitlement the leave, but, if correctly operated, could result in the loss of entitlement to leave at the end of the leave year.


What can employers take from this?

It states that statutory minimum annual leave is not absolute. This means that holiday entitlement can be lost if not taken before the end of the holiday year. This applies even if it was refused because of requirements of the business – such as staffing levels etc.

However, it is key that employers expressly state that holiday requests may be refused. They should ensure that any rejection is reasonable and can be legally defended. This protects everyone in the event of a claim being made for constructive dismissal.

It is advised in practice for employers to stipulate additional company leave entitlement in their T&Cs.  This also goes for their policies on holiday entitlement and rules on requesting and authorising holiday.

For further support on any of the areas covered or creating bespoke fit for purpose policies please get in touch.

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