The complete HR guide to annual leave & holiday pay

Annual leave is more than just time off. It’s a crucial part of maintaining employee wellbeing and productivity.

Yet slightly less than 61% of workers in the UK didn’t take all of their annual leave in 2023—a worrying trend that can impact both employee morale and mental health.

In this BambooHR guide, we’ll discuss what professionals and small business owners need to know about managing annual leave and holiday pay—focusing on best practices that encourage staff to rest, recharge, and return more engaged.

What is annual leave?

Annual leave refers to the paid time off work that employees in the UK are legally entitled to each year. Most workers are entitled to 5.6 weeks of paid holiday—known as statutory annual leave. This holiday entitlement applies to:

• agency workers
• workers with irregular hours
• part-year workers.

Employers may choose to include holiday seasons or bank holidays as part of an employee’s statutory annual leave entitlement.

How much is the minimum holiday entitlement in the UK?

Most employees working a standard five-day week are entitled to at least 28 days of paid annual leave each year. This is equivalent to 5.6 weeks’ holiday.

Part-time workers also receive 5.6 weeks of paid annual leave, but since they work fewer days, their total holiday is proportionally lower. For example, if an employee works three days per week, they must receive 16.8 days of annual leave. 3 × 5.6 = 16.8 days

Employees with irregular or part-year hours are entitled to up to 5.6 weeks of statutory leave. This means they earn their entitlement gradually—known as accruing leave—depending on the number of hours they work.

Do employers have to pay employees for annual leave?

Yes. Under UK employment law, paid annual leave is a legal right for all workers. Employers are obligated to pay staff their standard rate during holidays. Where employees feel their statutory leave or pay entitlement has been denied, they may use internal or external dispute processes.

What is holiday pay?

In the UK, holiday pay is another way to describe a worker’s legal entitlement to paid leave, generally amounting to 5.6 weeks of pay per year. This applies to part-time workers as well.

Most individuals engaged under an employment or worker contract—including casual, part-time, or hourly-paid arrangements—qualify for statutory holiday pay.

How does holiday pay work? And how to calculate it

Holiday pay ensures employees are paid fairly when taking time off. A working week usually runs Sunday to Saturday, though employers can use a different seven-day period if it matches payroll—for example, Thursday to Wednesday.

• Fixed hours: If a worker’s hours stay the same, they should get their usual pay. So, someone working 37 hours at £500 earns £500 for a week off.
• Irregular or part-year hours: Employers must follow specific rules to calculate fair pay based on average hours worked.
• Changing hours: If an employee moves from full-time to part-time, their new leave entitlement starts from that change, but their previous accrual remains the same.

Employers can calculate their holiday pay entitlement on the official government website.

What if I have employees who don’t have fixed hours or pay?

Zero-hours staff tend to have irregular hours, where they may work 20 hours one week, 5 the next. On the surface, it looks like this will make it difficult to calculate holiday allowance.

For zero-hours staff, a fast and simple way to calculate holiday entitlement is by using the 12.07% rule. Since employees are entitled to 5.6 weeks of leave each year, this works out to 12.07% of their total hours worked. So, for every hour someone works, they build up about seven minutes of paid holiday. Simply multiply their total hours by 12.07% to find out how much leave they’ve earned.

Tips for creating an annual leave policy that benefits your team

Creating an effective annual leave policy ensures fairness, clarity, and better workforce planning. Here are some best practices you can apply with your employees.

• Create a fair and consistent policy: Apply the same rules to all employees, ensuring equality across departments and job levels. This builds trust and avoids disputes.
• Have a clear booking process: Use an easy, transparent system for requesting time off and approving leave so staff know how to plan.
• Set clear notice periods: Define how far in advance employees should request time off to help managers schedule workloads efficiently.
• Provide guidance for managers: Outline when and how a request can be refused, ensuring refusals are reasonable and compliant with employment law.
• Use software tools: Platforms like BambooHR feature leave tracking software to help avoid overlaps and keep accurate records.
• Communicate around bank holidays: Clarify whether bank holidays count toward annual leave and communicate closure days early to aid planning.

Annual leave FAQs

This section provides answers to some of the most common questions employers and HR professionals may have about annual leave. It’s designed to offer further clarity on key aspects of leave entitlements, policies, and best practices.

Do zero-hour contract workers get annual leave?

Yes. Workers on zero-hour contracts, also known as casual contracts, are still entitled to statutory annual leave. These contracts are typically used for on-call or piecework arrangements, where employers don’t have to offer shifts, and workers can choose whether to accept them.

Can employees roll over annual leave?

The ability to carry forward annual leave is determined by the employer. Workers may transfer part of their statutory 5.6 weeks’ entitlement only where a relevant agreement exists—such as a workforce, collective, or contractual arrangement. In the absence of such an agreement, leave must be used within the holiday year, except in cases of long-term incapacity such as sickness.

How many days is annual leave?

In the UK, the legal minimum for annual leave is 5.6 weeks, equal to 28 days for employees working a five-day week. However, employers can choose to offer more generous leave policies, such as extra days for long service, additional company holidays, or even unlimited annual leave.