Should you give annual leave carry over to your employees?

February 12, 2020
Should you give annual leave carry over to your employees?

In the UK, employees get a legal minimum of 5.6 weeks paid annual leave (or the part-time equivalent). But what happens if you reach the end of the year, with holiday entitlement left over?

Annual leave carry over is a hotly debated topic in the world of HR. Especially in the UK, where the amount of holiday you can carry over varies hugely from contract to contract, and from expert to expert.

So how much annual leave carry over should you give your employees?

The trouble with annual leave carry over

I’ve written before that it’s bad for business if employees are ‘banking’ their holiday entitlement from one year and into the next.

It’s already a challenge at the best of times for HR to encourage employees to spread their holiday entitlement evenly across the year, instead of letting it all bunch up around Christmas. So letting employees carry leave over to the next holiday year is only going to add to your problems.

But while a ‘use it or lose it’ annual leave carry over policy might seem harsh, some experts say it is the right thing to do.

Use it or lose it

Some HR professionals advocate a policy with no annual leave carry over. This is sometimes known as a ‘use it or lose it’ policy, and means that if holidays aren’t taken, they generally get cancelled at the end of the year.

“I believe businesses should review their reasons behind allowing holiday carry over as part of regular policy review” says Senior HR Consultant Tacita Small. “Everyone should be encouraged to take all of their leave within the year.”

This type of policy can encourage employees to plan their annual holidays more thoughtfully, for fear of missing out by the time the year cycles. But Tacita adds that you shouldn’t take a seriously hardline approach – you should have flexibility, and allow annual leave carry over for special circumstances.

Employees need regular rest

While a ‘use it or lose it’ approach can help prevent employees banking holiday leave, then booking it all at once, there’s another reason why you should be encouraging employees to spread their leave throughout the year.

Tacita says that your workforce should be having regular breaks throughout the year, for the sake of their wellbeing. And if employees spread their entitlement throughout the year, this produces a nice balance of work and rest.

“The statutory allowance enables employees to take around a week a quarter not including bank holiday days for rest and renewal” says Tacita. “This should be encouraged. Perhaps a change in terminology from holiday or annual leave to ‘rest period’ would change the mindset of employers, and encourage them to ensure employees take regular breaks from what is often a fast-paced working environment.”

A limited flexible carry over policy?

While most experienced HR professionals will agree that an unlimited carry over policy is likely to spell trouble, not all employers agree with a strict ‘use it or lose it’ policy. Kari Munro, Head of Group HR at WMG, gives employees a flexible, albeit limited carry over allowance.

“We have the option to carry over up to five days into the new holiday year” says Kari. “This gives greater flexibility for individuals to use their holidays when they would like, and means they are not forced to take them when they might not want. It also avoids everyone taking them at the same time – at the end of the calendar year in a frenzy!”

Kari adds that this slightly more flexible policy also delivers extra benefits for employees who want to take a long haul break, or for employees who might want to see family over the Christmas and New Year period, to run alongside the school holidays.

“Our only stipulation is that holiday entitlement carry over gets used up by the end of March” says Kari. “It is an extra admin task because an awareness of how many carried over is required, plus reminders to ensure they are taken by the correct time. But the positives far outweigh the challenges, and we have a good HRIS in place which helps.”

Is something stopping employees managing to book holidays during the year?

If you are finding that employees regularly have holiday days left over at the end of the year, then you might have a bigger problem than just the wrong carry over policy. According to Tacita, some employers make it very challenging for their workforce to reasonably use their full entitlement.

“I have witnessed organisations that effectively shorten the holiday year by up to a third due to projects, deadlines and restricted other periods” she says. “These actions inhibit employees to take their accrued leave, therefore cutting down the amount of time allowed to take leave.”

So before you decide to allow annual leave carry over or not, you need to ask yourself: Am I doing something that is preventing my employees from taking their full holiday entitlement?

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