Creating a straightforward and legally sound holiday entitlement policy for your startup is key to attracting top talent, managing expectations, promoting employee well-being, and steering clear of any potential confusion. (Please see our other article on ‘Understanding Annual Holiday Pay Entitlement’ if you need some tips!)
It doesn’t have to be complicated, and you can always refine the policy as the team grows. To make things easier, we’ve included a really simple example policy at the end.
Step 1: Define the Purpose of The Policy
Start by explaining why the policy exists and its importance for both the business and employees.
Example: Our holiday policy ensures that all employees understand their annual leave rights, enabling them to take time off to rest and recharge while supporting the smooth operation of the business.
Step 2: Confirm the Legal Framework
Reference the relevant UK legislation to establish the policy’s legal compliance.
Example: This policy complies with the Working Time Regulations 1998, which provide all employees and workers with the statutory minimum of 5.6 weeks of paid annual leave per year (pro-rated for part-time employees).
Step 3: Outline the Holiday Entitlement
Clearly define how much holiday your employees are entitled to.
- Full-Time Employees:
- State the entitlement (e.g. 28 days per year, inclusive of bank holidays, for employees working 5 days per week)
- Part-Time Employees:
- Include an explanation of pro-rata calculations (e.g., Entitlement is calculated based on the number of days or hours worked).
- Zero-Hours or Irregular Workers:
- Mention the accrual rate (e.g. Entitlement accrues at 12.07% of hours worked).
Step 4: Define the Company Leave Year
Define the annual leave calendar for your business.
Example: The leave year runs from [1st January] to [31st December]. All annual leave should be taken within this period unless otherwise agreed with your manager.
Step 5: Address Bank Holidays
Explain how bank holidays are treated.
- Inclusive or Additional:
Bank holidays are included within the annual leave entitlement of 28 days.
OR
Bank holidays are provided in addition to the statutory annual leave entitlement - Variation:
Mention any variations (e.g. for roles requiring work on bank holidays) - Employees required to work on a bank holiday may take a substitute day off, subject to management approval.
Step 6: Outline Booking Procedures
Provide clear steps for requesting and approving leave.
Example:
- All leave requests must be submitted through [Aigence, our Payroll Software] at least 2 Weeks in advance.
- Approval is subject to business needs and will be confirmed by your manager.
- Employees should avoid booking travel until leave is formally approved.
Step 7: Unused Leave and Carry-Over Rules
Specify what happens to any unused holiday entitlement.
Example:
- Employees are encouraged to take their full entitlement within the leave year. But in certain circumstances your manager can approve up to [5 days] to be carried over to the next holiday year.
Step 8: Accrual During Employment
Detail how holiday entitlement is accrued and calculated.
Example:
- Employees accrue leave on a monthly basis, calculated at 1/12th of the annual entitlement per month worked.
- In the first year of employment, holiday may be taken after [3 months of service], subject to management approval.
Step 9: Address Resignation or Termination
Explain how holiday is handled if one of the team resigns or their employment is terminated.
Example:
- Upon leaving, employees will be paid for any accrued but untaken holiday. If more leave has been taken than accrued, the overpayment will be deducted from the final salary.
- Holiday during notice periods must be agreed with your line manager.
Step 10: Extra Leave or Company Benefits
Specify any additional leave or benefits.
- Enhanced Leave:
In addition to statutory leave, the company provides [5 additional days] of paid leave annually. - Special Leave:
Additional unpaid or paid leave may be granted for personal circumstances, subject to management discretion.
- Birthday/Anniversary Leave:
Employees are entitled to an additional day off on their birthday or work anniversary.
Step 11: Define Responsibilities
Clarify the roles of both employees and managers in ensuring smooth leave management.
Example:
- Employees are responsible for submitting leave requests and planning their leave responsibly.
- Managers are responsible for approving leave fairly and ensuring continued business operations.
Step 12: Add a Discretionary Clause
Include flexibility for any unique situations that may arise.
Example: The company reserves the right to review and adjust this policy as necessary, ensuring compliance with legal obligations and business needs.
Step 13: Finalize and Communicate
- Ensure the policy is reviewed for legal compliance.
- Communicate the policy clearly to employees via an employee handbook or onboarding process.
- Provide a point of contact for questions.
Example Holiday Policy
- Purpose: Our holiday policy ensures that all employees understand their annual leave rights, enabling them to take time off to rest and recharge while supporting the smooth operation of the business.
- Legal Framework: This policy complies with the Working Time Regulations 1998, which provide all employees and workers with the statutory minimum of 5.6 weeks of paid annual leave per year (pro-rated for part-time employees).
- Entitlement
- Full-Time Employees- 28 days per year, inclusive of bank holidays
- Part-Time Employees- Part-time workers are entitled to the same 5.6 weeks of leave, pro-rated based on the number of days they work. (If someone works 3 days per week, their entitlement is 5.6 × 3 = 16.8 days)
- Leave Year: 1st January- 31st December
- Bank Holidays: Bank holidays are included within the annual leave entitlement.
- Booking Procedures: Please book all leave through the Aigence portal
- Unused Leave: Employees are encouraged to take their full entitlement within the leave year. But in certain circumstances your manager can approve up to [5 days] to be carried over to the next holiday year.
- Accrual: Employees accrue leave on a monthly basis, calculated at 1/12th of the annual entitlement per month worked.
- Termination or Resignation:
- Upon leaving, employees will be paid for any accrued but untaken holiday. If more leave has been taken than accrued, the overpayment will be deducted from the final salary.
- Holiday during notice periods must be agreed with your line manager.
- Extra Leave: Employees are entitled to an additional day off on their birthday
- Responsibilities:
- Employees are responsible for submitting leave requests and planning their leave responsibly.
- Managers are responsible for approving leave fairly and ensuring continued business operations.
- Policy Review and Amendments: The company reserves the right to review and adjust this policy as necessary, ensuring compliance with legal obligations and business needs.