How to Calculate Accrued Holiday Entitlement for Employees

HR already have enough on their plates without having to spend hours calculating how much holiday an employee has accrued. It can be complicated and time-consuming and when calculated alongside other forms of leave, like sick leave and parental leave, things only get more complex.

However, calculating accrued holidays for employees doesn’t have to be a headache. Like so many things in HR, once you know what you’re doing it gets quite easy.

In this post, we’ll explain what accrued holiday is, how to calculate accrued holiday for employees, and share some tips that’ll make it as easy as possible.

What is accrued holiday?

Accrued holiday is where employees build up their annual leave over the first year of their employment. Annual leave is built up each month per employee. For example, after 3 months of working in the business, an employee would have accrued a quarter of their annual entitlement.

Accrued holiday and UK employment law

Employees start accruing annual leave from the first day they start their job.

Calculating accrued holidays for employees will depend on how your “holiday year” works. Some businesses keep it simple and make their leave year run from January 1st – December 31st. Other businesses base it on the financial year so that it runs from April to April, and others base it on the employee’s start date.

You need to inform new employees about how your leave year works when they start and make it clear that you encourage all employees to take their statutory holiday entitlement during the leave year. You may also choose to let employees carryover unused leave into the next year.

For almost all workers in the UK, statutory leave is 5.6 weeks a year. For those who work five-day weeks, this will extend to 28 days paid annual leave a year.

The leave year and employees’ holiday entitlement are not affected by other types of leave, such as maternity, paternity, and adoption leave. Even if an employee takes a few weeks of maternity leave, they will still accrue a holiday during this period.

Calculating accrued holiday for an employee who starts partway through the year

Let’s say your leave year runs from January 1st – December 31st, and a new employee starts in April. They’ll only be entitled to a part of their total annual leave for the current leave year, and their leave entitlement for their first year will depend on how much of the year remains.

So how do you calculate holiday entitlement?

Just think of it like this: Employees accrue 1/12th of their total entitlement each month. For an employee who joins you in April, their holiday entitlement will be based on the period running from April to the end of December.

This is 9/12 of a full year’s holiday allowance. If they’re a full-time member of staff entitled to 28 days paid leave a year, this employee who starts in April will be entitled to 9/12 of 28 days, which is 21 days.

For part-time employees, the calculation is a little bit more complicated. Read our guide to calculating pro-rata holiday entitlement here.

We have a handy online holiday entitlement calculator to help you calculate accrued holiday entitlement for every member of staff, regardless of their hours or their shift patterns.

Carrying over accrued holiday into the next year

According to UK employment law, if an employee has 28 days’ annual leave a year, then they can carry over annual leave a maximum of eight days into the next year.

If your employees get more than 28 days to leave a year, then it’s up to you how many additional days of un-taken leave they can carry into the next year. In any case, to avoid any uncertainty, it’s vital that you specify your rules and policies in your employee contracts and company handbooks.

There are some circumstances in which you have a legal requirement to let employees carry over large amounts of annual leave into the next year. For example, employees who are off sick for long periods of time may not be able to take all of their statutory leave in a year. In this case, you must allow the employee to carry over up to 20 of their 28 days’ leave entitlement into the next year.

You might feel that this will be bad for business. After all, if an employee already missed large amounts of work due to a long-term illness, then you’ll want to get them back to work as soon as possible, rather than give them any more time off!

But your real priority should be ensuring that this employee is able to properly recover. All employees need to take a break now and then and periods of long-term sickness absence aren’t exactly a picnic. Letting an employee who missed lots of work due to sickness take further time off to relax and recover will be better for your business’s long-term productivity. They’ll return fully refreshed, and ready to give their very best again.

How to manage accrued holiday leave for employees

Calculating accrued leave isn’t as hard as many HR professionals seem to think it is. But there is a lot to consider for every leave calculation you make. So why not automate it?

Our absence management system can automatically generate detailed breakdowns of used, taken, and remaining holiday allowance across teams and departments. Any employee can securely log on from any device, see how many holidays they’ve taken and how much they have left to take. You’ll never have to field another “how much holiday do I have left” email again.

Our simple paperless system typically saves organizations on average £289 per employee, per year. We’ve helped thousands of clients across the world streamline their absence management systems. We can do the same for you and give you confidence that you’re meeting compliance with an automated system.