A guide to managing staff annual leave effectively

Team Discussing Annual Leave

Updated on: 3/10/23


How do you manage annual leave right now? Whatever the size of your business, annual leave is something you must deal with.

Maybe you are struggling with the whole staff holiday management process, maybe team members are taking too much or too little annual leave, or maybe you’re simply struggling to answer all the questions employees have on annual leave.

Many businesses find that they have headaches approving and tracking annual leave requests. Sometimes it's easier to go back to basics on annual leave, absence management and holiday approval. That’s why in this blog, we’re going to take a ‘back to basics’ look at annual leave, including what it is and how to manage it in your business.

What is annual leave?

Annual leave, also known as staff holiday, is a period of paid time off work that is granted to employees by their employer. Employees can use their annual leave for any purpose, such as going on vacation, spending time with family and friends, or simply relaxing and recharging.

Is annual leave paid?

Employees continue to receive their normal wages while they are on annual leave. However, there are some exceptions to this rule. For example, in some countries, employees on zero-hours contracts may not be entitled to paid annual leave. Additionally, some employers may offer employees the option of taking unpaid annual leave. 

In the UK, annual leave is typically paid. It’s critical that contracts include all the information about a company's annual leave policies, including how it's paid, how much notice they need to give, and if an employee can take unpaid leave.

How much annual leave does an employee get per year?

In the United Kingdom, all employees are entitled to 5.6 weeks of paid annual leave per year, also known as statutory annual leave entitlement. This means that a full-time worker in the UK who works a five-day week has the right to 28 days' holiday.

Certain employers may decide to offer their employees more than the statutory minimum amount of annual leave, depending on their annual leave policies.

Is annual leave entitlement affected by UK bank holidays?

Some employers may count bank holidays as part of your annual leave entitlement, while others may give you additional days off for bank holidays. Typically statutory annual leave will include bank holidays unless otherwise stated in a contract or annual leave policy. 

It is important to note that some employers may have different policies for different types of employees, such as different amounts of annual leave for full-time and part-time employees. There may also be the option for employees to work on a bank holiday, and take that day's holiday at another time of the year.

Do employees need to give notice for their annual leave?

Yes, employees need to give their employer advance notice when they want to take annual leave. The amount of notice required varies depending on the employer's annual leave policies. 

Most employers require at least two weeks' notice for all annual leave requests, however it can range from one week to a month. The employer’s choice in notice will allow them adequate notice to cover work whilst the employee is on leave and to avoid disruption in the business.

What are the three types of leave?

There are three types of leave: 

  • Annual Leave
  • Sick Leave
  • Maternity/Paternity Leave

All employees have the right to a minimum amount of annual leave, depending on their length of service. Employees can also take sick leave for illness or injury and maternity/paternity leave to care for a new child. 

It’s also up to you if you add any other types of annual leave to the mix!  If you can lay out clear ground rules you could offer compassionate leave, mental health days, duvet days or charitable endeavour days. The policies are endless if you include them in your annual leave policy!

The current state of annual leave in the workplace

Research into annual leave shows HR managers are finding it increasingly difficult to manage staff holidays.

A study by the Institute of Leadership & Management (ILM) found that 26% of organisations have no system in place to track employee absences. How do you manage team leaves without the data? It’s certainly tricky, and can lead to many problems, including:

  • Not being able to accurately forecast future absences
  • Increased workload for HR and managers in problem solving 
  • Higher levels of stress for employees
  • Reduced morale and motivation

If you are struggling with how to manage annual leave in your workplace, there are some steps you can take to make this process more effective, but first, what do you need to know about the requirements?

What are annual leave requirements?

Employees should receive their full entitlement to annual leave from the start of their employment. However, employers can choose to give staff accrued leave instead, which means you would allow them to take time off gradually over the course of the year.

There is no maximum legal number of days that an employee can be given, and this is entirely up to the employer, but it is important to be fair. You don't want team members to feel like they can't take any time off or that they must hoard their days in case they need them later in the year. When you look at how to manage annual leave, you first have to have a good understanding of your current offering, and how that is performing for you and your employees.

Don’t forget your casual and flexible workers too! We recommend reading how to calculate holiday entitlement for casual workers to understand this in more depth.

How to manage staff annual leave

Managing staff annual leave can be challenging, but it is important to do so effectively. There are a few options when it comes to recording staff leave.

1. Using a leave plan to manage annual leave requests

 A leave plan is a document that sets out an employee's entitlement to annual leave, sick leave, and other types of leave.  

  • The leave plan should be signed by both the employer and the employee and kept on file in case there are any disputes about entitlements.  
  • The leave plan is part of the process, but it can’t cover the method.  

By using a leave plan, you are legally covered, but still have admin burden from approvals, tracking and managing leave requests.

2. Using spreadsheets

You might also be using spreadsheets to manage staff holidays, which is common for SMBs who start out looking for a solution. Unfortunately, spreadsheets are far from perfect and don’t address the root cause of those tricky admin issues. Here’s why using spreadsheets for annual leave management cause an issue:  

  • From research with our customers, we know that while spreadsheets provide order and a place to store data on annual leave, they don’t eliminate the tasks around approving, filing requests.
  • Human intervention is often needed, with secondary support from a calendar to ensure days off can be aligned by department. 
  • They also fail to highlight issues with annual leave, such as someone not taking time off regularly, unless a report is run specifically to investigate it.  

In short, spreadsheets and manual leave tracking leave wide gaps in your overall business knowledge.

3. Use HR software for managing annual leave in the workplace

At PeopleHR, we always say that a HR system can take the stress out of absence management, and we believe that a software solution is the best choice for a growing business.  

Here are some of the main benefits of managing annual leave using HR software.

  • Speed: Annual leave can be requested, authorised, and added to your staff holiday planner in seconds with a single tap. This is a real benefit for both employees and employers alike. 
  • Automation: Holidays can be approved automatically, and your holiday year can be set up, according to your rules.
  • Business protection: If you have busier periods or multiple holidays already booked, you can 'lock' these days to ensure you have all hands-on deck. This saves you from having to manually cross-check numerous spreadsheets to see who else might be off, from which teams and for how long.  
  • Ensure employee wellbeing: Absence tracking also helps you to identify trends before they become a problem. For example, employees that have worked six months consecutively with no leave could be at risk of burnout, and likewise, employees that have a pattern of sick leave may need some additional support from you.
  • Simplicity: You can allow your people to request annual leave from anywhere and on any device using HR Self Service.

All of these features are available in our HR Software.

Why not watch a 4 minute demo and see what is available?

Quick wins to improve your annual leave management right now

Try HR software!

HR software is built on the basis that absence management (which includes holiday management) will be a constant business need that needs to be effectively managed - which is why these functions are finely tuned to be perfect for most businesses. 

Instead of manual tricks and long winded workarounds, software built for purpose tackles the key issues and provides instant relief from the problems in managing annual leave. If you aren't ready to consider staff management software, then there are still quick ways to improve your annual leave process.

Try and digitise

While dedicated absence management software can automate a lot of the process and make it easier to track and manage leave requests, you may still be able to move things further online. Consider the use of online tools such as: 

  • Dropbox  
  • Google Sheets
  • Trello 
  • Existing internal platforms  
  • Email systems

The structure of what you could do will vary depending on what you use, but you could effectively have a place where you add your: 

  • Annual leave policy 
  • Annual leave reminders 
  • How to book annual leave guides 
  • A calendar of other employee’s time off for cross-referencing

It's not a perfect system, but it could add a level of self-service for the employees, taking some pressure off the one point of contact in the business, and may also show the tracking of who has edited what and when for full clarity.

Ensure knowledge of the annual leave booking process

It can be useful to make sure everyone is aware of the annual leave policy and do's and don'ts when booking or requesting staff leave. This is often covered at onboarding, but this is a time when information overload can take over, and employees end up making their own rules and sharing these unofficially. 

Why not run a company-wide refresher session which lays out the ground rules and process for booking annual leave and what is and isn't acceptable? This refresher could again help give HR some breathing space.

Review your annual leave policy

Just as with helping refresh knowledge on the annual leave booking process, you could look at refreshing your annual leave policy as a whole. It's your job in HR to make sure it's clear, fair, and easy to understand.

This includes outlining how much annual leave employees are entitled to, how to request annual leave, and how annual leave requests will be approved, which we’ve covered in this blog.

Absence management software: The secret to a happy and productive workforce

With all of this in mind, it's clear that understanding and managing annual leave can be a difficult task. However, by using the right tools and processes, you can make it much easier for yourself and your employees. 

With People HR's absence management software, you can make sure your business doesn't grind to a stop when your employees take time off work. Invest in absence management software today and unlock the secret to an engaged and productive workforce.  

Our absence management software makes it easy to manage all types of staff absences in one place.  

Connect with us today. Watch the video 4 minute demo.

Gareth Moss
By Gareth Moss New Business Sales Team Leader

Gareth Moss is a New Business Sales Team Leader with nearly a decade of experience in the Access PeopleHR product. Gareth specialises in serving those within the SMB market, and his passion lies in helping businesses streamline their HR operations. Before transitioning into his current role, Gareth was a HR software product trainer, making him your ‘go to’ guy for all things PeopleHR.