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Start a free trialOn the surface, and if you’ve never been responsible for it before, annual leave seems pretty simple. But the reality is that it’s actually quite nuanced and can vary massively from business to business.
We all understand that holidays are important, but do you know how many annual leave days per year you legally have to give your team?
And how much annual leave is too much? (Bearing in mind that you don’t want to look like a miser or gain a reputation as an employer who doesn’t care about wellbeing.)
We understand this at Charlie because we’ve gone from offering unlimited annual leave (which sounds incredible in theory, but no one actually wanted) to finding an annual leave entitlement sweet spot that everyone’s really happy with.
I’ve written this blog to give you tried and tested practical guidance around annual leave. We’ll cover everything from how to calculate annual leave to what to include in your annual leave policy, and wherever relevant I’ll share what we’ve done at Charlie so you can skip some of your own trial and error.
Annual leave is the amount of paid time off an employee is entitled to take each year.
Also often referred to as holiday leave, statutory leave or paid time off, annual leave is one of the main benefits awarded to paid employees and accrues month on month.
So that’s the annual leave meaning, now let’s look at statutory leave…
Statutory leave is the term for all legally required paid time off, and includes sick leave, maternity leave and annual leave entitlement.
Most people working a five day week will receive at least 28 days’ (or 5.6 weeks) paid statutory leave per year.
But that doesn’t have to be all the annual leave you can give.
Counter to what you might initially think, rewarding your team with more annual leave entitlement than the statutory standard can be good for business.
Many startups and small business owners assume that more holidays will equate to less work, but in my experience it’s actually the opposite.
So when you’re working out your own annual leave calculation, take some time to consider the very real benefits of offering a more generous holiday allowance:
In a typical year, there are eight bank holidays in the UK. Some employers choose to include these public holidays in their employee’s annual leave entitlement, and this is entirely permissible from a legal point of view.
But including bank holidays means that in reality each employee only gets 20 annual leave days per year. So I recommend reworking your annual leave calculation to offer bank holidays in addition to your team’s holiday allowance (like we do at Charlie) and ensure they get enough time off.
Another alternative is to allow your employees to work the bank holidays and take time off on other days — this is inclusive of those who don't observe the official UK bank holidays but celebrate at other times of year (Ramadan or Diwali, for example).
Whatever you decide, be sure to clearly communicate it via your annual leave policy so your team knows for sure whether bank holidays are included in their entitlement or not.
Now that we've covered the basics, I want to answer some questions and share practical tips (including how to calculate annual leave) to help you confidently manage holiday leave at your small business.
The amount of annual leave accrued depends on how much time an employee works per week.
For people who work a five day-week (full time hours), it’s pretty simple: they get a minimum annual leave entitlement of 28 days per year (statutory leave).
The annual leave year doesn't have to be from January to December — it's actually entirely up to you as the employer when you run your holiday year.
These are the most common annual leave year options:
Whatever choice you make, you’ll need to include the annual leave year in your employment contracts and your annual leave policy. And you’ll have a baseline for calculating how much holiday your team has accrued.
If you have part-time employees, you'll have to calculate their annual leave entitlement according to how many days they work per week.
There's also the possibility that your team members are paid hourly. In this case, their holiday would be calculated according to the number of hours they’ve worked.
Here’s how to calculate annual leave for part-time employees:
To find out the number of annual leave days someone is entitled to, divide the annual allowance by 12. For example:
Your annual leave year runs from April to March, with 25 days holiday, and an employee started with you in May and is leaving in January = they’re entitled to roughly 17 days.
To find out how much annual leave someone’s currently entitled to (whether they're leaving or they're part-time), you can use our holiday calculator — it will also help you calculate annual leave pay.
One thing I’ll never understand is why some companies have unnecessarily complicated processes in place for their teams to request annual leave. This is only ever going to cause roadblocks, frustration, and extra admin.
You can’t just have an annual leave policy and no structured way to follow it — the process for making requests is actually a really important part of your annual leave offering, as it affects how your employees feel.
Requesting holiday should be simple, quick, and straightforward, and it should be obvious how many annual leave days per year each team member has left to take.
A holiday request form is one way to create a clear process, standardise requests, and ensure you don’t get emails with missing information. And it can include a simple annual leave calculation so that each request shows how much annual leave entitlement has been used.
In addition to this, I recommend auditing your annual leave process to find out what needs improving and how it can be streamlined.
An annual leave request form will make your process smoother, but it won’t do much in terms of reducing your annual leave admin. You’ll still have to reply to emails, record the time off, make sure there’s no overlap, and update your team’s annual leave entitlement.
So how do you remove some of that admin from your day?
It might not be the perfect solution, but it’s a good start.
There will come a time when you simply can’t stay on top of all the annual leave requests. As a growing small business, this will happen naturally — new people come onboard and inevitably add to your already sizable HR workload:
But the good news is that annual leave admin doesn’t have to be a manual task. And the streamlining solutions above can actually be ditched in favour of software like Charlie that stores, calculates, schedules and communicates your team’s annual leave.
With Charlie, you have the perfect solution — an annual leave process that runs itself!
Charlie also automates all annual leave calculations — any holiday rollover or new starter annual leave entitlement is automatically worked out, as are the annual leave days per year for part-time employees.
HR software like Charlie automates everything to do with annual leave so that you have a time off system that just works. Get our free guide to find out more about it.
A clear annual leave policy is crucial for you and your team. Through it, you can:
Carrying over holiday means moving untaken annual leave into the next year, so that it isn’t wasted.
There are all sorts of reasons why members of your team might not have been able to use all of their annual leave days, which is why a carry-over clause is a good idea.
Typically, a holiday rollover clause will limit the number of days that can be carried over — no more than five, for example, to prevent too much unused annual leave from building up.
Unpaid leave is time away from work without receiving any wages or salary, and is a possible solution if someone in your team needs some unexpected days off or has used up their annual leave entitlement.
I would always approach the idea of unpaid leave with consideration and a little caution, as you don’t want it becoming a too regular thing and compromising productivity.
The best way around this is to state that all unpaid leave requests will be handled on a case by case basis in your annual leave policy.
More popular in the UK in recent years, sabbatical leave is when a member of your team takes an extended break from work — usually somewhere between one and six months.
Offering sabbatical leave to long-term employees is a good way to reward them for everything they’ve contributed to the company. At Charlie, we offer a month’s sabbatical leave at 50% salary to team members who’ve been with us for over three years.
As I mentioned earlier, it’s possible to offer more than statutory leave and there are different ways you can personalise your annual leave policy and enhance your company culture.
Again, this is totally up to you but here’s a couple of current annual leave trends:
My biggest tip when it comes to annual leave is to be open to experimenting and iterating, as it may take a while to work out what’s best for your team and business. So rather it being a question of “How does annual leave work?”, it’s actually “How does annual leave work best for you?”.
For all other types of leave (maternity/paternity leave, adoption leave, sick leave, bereavement leave etc.), download our free guide to managing time off at small businesses.
