Skip to main content

A business owner’s guide to annual leave

A business owner’s guide to annual leave
Click to enlarge
A business owner’s guide to annual leave
Sandhya Iyer - HR Dept Sevenoaks Tonbridge Tunbridge Wells by Sandhya Iyer - HR Dept Sevenoaks Tonbridge Tunbridge Wells
Director - HR Dept Sevenoaks Tonbridge Tunbridge Wells

If you employ staff, one of the hot topics that you have to get to grips with is how much annual leave you need to give them.  It sounds like a straightforward question, but unfortunately, it’s not as simple as you might imagine. Sandhya Iyer of the HR Department explains what you need to consider when sorting out your employees’ annual leave entitlements.

The law states that full-time employees are entitled to 20 days’ annual leave plus eight bank holidays in any one leave year, with part-time staff being awarded leave on a pro-rata basis.  However, the exact amount of annual leave your staff will be entitled to will vary depending upon your leave year, the employment status of your staff and contractual hours, amongst other things.

Your annual leave year

Before calculating how much annual leave to award your staff, you first need to establish a clear-cut leave year.  There are two popular choices: a leave year that mirrors the calendar year (January to December) or a leave year that runs parallel to the tax year (April to March).

The calendar year is easier to manage administratively, particularly as it fits neatly with the Christmas and New Year holiday rush.  The tax year, on the other hand, can throw up more issues, especially when Easter gets in the way. Specifically, when Easter and/or Good Friday fall in March in any specific year, then your staff may get a bonanza that leave year, with the danger that you then fall foul of the statutory minimum of 20 days Annual Leave plus eight bank holidays in the following April to  March leave year if you don’t make up for the ‘missing’ Easter and/or Good Friday bank holidays.

The dangers of variable hours

Another pitfall is if you hire staff or workers on variable hours. Leave in such cases is usually accrued based on the specific number of hours worked, rather than days or months. If this is how your business is structured, then the most advisable and failsafe option is to invest in an automated toolkit and HR system which will accurately calculate accrued annual leave.  Unfortunately, too many employers have found out to their expense the risks of getting this wrong, with a number of legal cases being pursued successfully by staff whose annual leave was miscalculated.  Fortunately, technology these days provides a simple fix so you can feel confident you are getting it right.

Annual leave for recruiting and retaining staff

While the statutory minimum for any 12-month leave year is 20 days basic entitlement plus eight days bank holidays, there is nothing to stop you offering more than this.  A balanced and fair annual leave allowance could help you attract and retain the best candidates. For instance, offering an additional day of annual leave for each completed year of service can be a great strategy to help secure staff loyalty. Of course, you might want to consider capping this at some level, in case you end up with a long-timer accruing 40+ days of annual leave entitlement!

Making sure your staff enjoy the right amount of annual leave entitlement is essential for any business owner.  Fortunately, modern technology makes this simpler than ever, so your only headache should be agreeing when they are allowed to take it.

To find out how CapitalSpace virtual offices or business premises

could benefit your growing business,

call 0800 107 3667


Sandhya Iyer is the director of the HR Department, helping small- and medium-sized businesses in Tunbridge Wells, Tonbridge and Sevenoaks, Kent.  A graduate member of the Chartered Institute of Personnel and Development, she works with business owners, entrepreneurs and managers to prevent people problems and help them get the best from their staff.