Can Employers Dictate When Employees Take Annual Leave?

Managing annual leave effectively is an important part of running any business. It helps balance operational needs with employee wellbeing and legal compliance. But many UK employers ask the same question - can you actually decide when your employees take their holidays?

The short answer is yes, in some cases you can. However, there are specific notice rules and procedures you must follow to stay compliant. This guide breaks down your rights and responsibilities as an employer, explains how annual leave works under UK law, and outlines best practices for managing holidays in your business.

What Is the Legal Minimum Holiday Entitlement in the UK?

Under the Working Time Regulations 1998, all workers in the UK are entitled to a minimum of 5.6 weeks’ paid annual leave per leave year. For someone working five days a week, this equals 28 days’ paid holiday.

Part-time employees are entitled to the same amount of leave on a pro-rata basis. For example, an employee working three days per week is entitled to 16.8 days per year (3 × 5.6).

As the employer, you can decide whether bank holidays are included in this minimum entitlement or provided as additional leave. If your business operates on bank holidays, you’ll need to ensure employees can take their leave at another time.

For staff who work irregular hours or part of the year, new 2024 rules allow you to calculate entitlement using the 12.07% accrual method. It’s important to set this out clearly in employment contracts to avoid disputes later.

Remember, annual leave entitlement starts accruing from the first day of employment.

When Can Employers Require Employees to Take Annual Leave?

You can require employees to take holiday at specific times, provided you give the correct notice and it’s reasonable to do so. Common examples include:

• Business shutdowns during quiet periods (for example, over Christmas or between projects)

• Planned maintenance closures

• Periods of reduced demand

• Mandatory training or company-wide events

These arrangements are lawful if they are clearly communicated and meet the statutory notice rules.

Notice Requirements for Mandatory Leave

To require an employee to take leave on specific dates, you must give written notice at least twice the length of the leave you want them to take. For instance, if you want them to take one week off, you must provide at least two weeks’ written notice.

You can also agree alternative notice arrangements in employment contracts or staff handbooks, but they must be clearly documented and reasonable.

Can You Book Holidays on Behalf of Employees?

Yes - employers can schedule holidays on behalf of employees, such as during planned shutdowns or to ensure leave is taken before the end of the holiday year. However, the same notice rules apply.

It’s always best practice to discuss holiday plans with employees first. Even though you have the right to dictate leave in certain cases, involving staff in the process helps maintain trust and avoids unnecessary friction.

If you need employees to take time off but haven’t provided enough notice, consider offering flexibility or reaching an agreement rather than enforcing leave abruptly.

How Should Employees Request Annual Leave?

Employees must give you notice that’s at least twice the length of the leave they’re requesting. For example, if they want two days off, they must provide four days’ notice.

You have the right to refuse a holiday request, but you must also give notice that’s at least equal to the amount of leave requested. So if an employee asks for five days off, you must notify them of your refusal at least five days before the leave would have started.

Set out a clear internal process for requesting and approving leave - ideally through your HR system or in writing - so you can keep accurate records and avoid disputes.

Can Employees Take Unpaid Leave?

Employees do not have a statutory right to take unpaid leave, except in specific circumstances such as parental leave or time off for dependants. However, you can agree to unpaid leave at your discretion if it suits business needs.

Any arrangement for unpaid leave should be made in writing, so both sides are clear on the terms and duration.

How Should Employers Calculate Holiday Pay?

As an employer, you must pay employees their normal rate of pay during annual leave. This includes not only basic salary but also regular overtime, commission, and bonuses that form part of their normal pay. This was confirmed in the case of Bear Scotland Ltd v Fulton (2014).

For staff with variable hours or pay, calculate holiday pay based on the average pay from the previous 52 weeks in which pay was received (excluding unpaid weeks).

If an employee leaves your business, you must pay them for any unused statutory holiday in their final payslip. Failing to do so can lead to unlawful deduction from wages claims or employment tribunal disputes.

Do Bank Holidays Count Towards the Minimum Leave?

You have discretion as an employer over whether bank holidays count towards the statutory 5.6 weeks of leave or are granted as additional days off.

If your business stays open on bank holidays, employees who work those days should either:

• Be given another day off in lieu, or

• Receive pay in line with what’s agreed in their employment contract or staff handbook

There is no automatic right to enhanced pay for working on bank holidays unless it’s contractually agreed.

Can You Dismiss an Employee for Taking Holiday?

You cannot dismiss an employee for taking statutory annual leave they’re entitled to. Doing so would likely be considered an automatically unfair dismissal under the Employment Rights Act 1996.

You can, however, take disciplinary action if an employee breaches your policies - for example, by taking leave without authorisation or failing to follow the correct booking procedure. Even in these cases, you must follow a fair disciplinary process.

What Happens If Employees Don’t Use All Their Holiday?

As the employer, you can set a clear holiday year in your contracts or policies. Employees should normally take all their leave within that year.

Unused leave can be forfeited unless:

• You allow carry-over under your policy, or

• The employee couldn’t take leave due to sickness, maternity, paternity, adoption, or shared-parental leave (in which case, carry-over is a legal right)

You can require employees to use their remaining leave before year-end, provided you give the correct written notice. This can help avoid operational disruption or a buildup of unused holiday.

Best Practices for Employers Managing Annual Leave

• Set out your rules clearly in contracts and staff handbooks, including notice requirements, booking procedures, bank holiday policies, and carry-over terms.

• Use a consistent and transparent approval process to avoid claims of unfairness or discrimination.

• Communicate business closures and busy periods well in advance.

• Keep accurate records of annual leave taken and holiday pay calculations for compliance purposes.

• Engage with employees when planning mandatory leave periods - consultation helps maintain trust and reduces conflict.

• Review and update your policies regularly to reflect legal changes, such as the new 2024 rules on irregular-hours workers.

Key Takeaways

• Employers must provide a minimum of 5.6 weeks’ paid annual leave per year (pro-rated for part-time staff).

• You can require employees to take leave at certain times, provided you give written notice at least twice the length of the leave.

• Holiday pay must reflect normal pay, including regular overtime and commission.

• Employees cannot be dismissed for taking lawful holiday, though disciplinary action may apply for policy breaches.

• Clear communication, written policies, and accurate records are key to managing annual leave effectively and lawfully.

If you’d like help reviewing your business’s annual leave policies, drafting compliant contracts, or resolving a holiday dispute, Sprintlaw’s expert employment lawyers can help. Contact us at team@sprintlaw.co.uk or call 08081347754 for a free, no-obligations chat.