Annual leave is one of the most important employee benefits and a legal requirement under the Working Time Regulations 1998. For UK small businesses, a clear annual leave policy prevents disputes, ensures compliance, and helps manage workforce planning. This template provides a complete, ready-to-use annual leave policy that covers statutory entitlements, bank holidays, carry-over rules, and booking procedures.
Key Takeaways
- The Working Time Regulations 1998 provide a statutory minimum of 5.6 weeks (28 days for full-time workers) of paid annual leave per year.
- Bank holidays can count towards the statutory 5.6 weeks if your contract states this.
- Unused leave can be carried over in limited circumstances, but employers can require employees to take their full entitlement.
- Accrual rules for new starters and leavers must be clearly defined.
What This Template Covers
This template provides a complete annual leave policy for UK small businesses. It covers statutory entitlement under the Working Time Regulations 1998, bank holiday treatment, accrual for new starters and leavers, carry-over provisions, booking procedures, and unauthorised absence. It is designed for businesses with fewer than 250 employees.
Annual Leave Policy Template
1. Purpose
[Company Name] recognises that rest and relaxation are essential for employee health, wellbeing, and productivity. This policy outlines the annual leave entitlements, procedures, and rules that apply to all employees.
2. Scope
This policy applies to all employees of [Company Name], including full-time, part-time, and fixed-term employees. It does not apply to agency workers, contractors, or the self-employed.
3. Statutory Entitlement (Working Time Regulations 1998)
Under the Working Time Regulations 1998 (WTR), all employees are entitled to a minimum of 5.6 weeks’ paid annual leave per year. For a full-time employee working 5 days per week, this equates to 28 days.
- The statutory maximum is 28 days — even if the employee works more than 5 days per week.
- Part-time employees are entitled to 5.6 times their usual working week (e.g., an employee working 3 days per week is entitled to 16.8 days).
- The leave year runs from [1 January to 31 December / April to March / other period].
4. Company Annual Leave Entitlement
[Company Name] provides the following annual leave entitlement in excess of the statutory minimum:
- Full-time employees: [25–30] days of annual leave + [8] bank holidays = [33–38] days per year.
- Part-time employees: Leave entitlement is calculated on a pro rata basis relative to their usual working days. Bank holidays falling on a non-working day are not counted.
- [Additional benefits]: [X] additional days are awarded after [X] years of service, up to a maximum of [X] days.
5. Bank Holidays
[Company Name] observes the following bank holidays:
- New Year’s Day
- Good Friday
- Easter Monday
- Early May Bank Holiday
- Spring Bank Holiday
- Summer Bank Holiday
- Christmas Day
- Boxing Day
[Option A: Bank holidays are included in the statutory 5.6 weeks.] [Option B: Bank holidays are provided in addition to the annual leave entitlement.]
Where a bank holiday falls on a weekend, [Company Name] will observe the following Monday as a substitute day / [no substitute day is provided].
6. Accrual for New Starters
- New employees accrue annual leave on a pro rata basis during their first year of employment.
- Accrual is calculated at 1/12th of the annual entitlement for each complete month of service.
- Employees may take leave from their first day of employment, subject to manager approval and business needs.
7. Accrual for Leavers
- Employees leaving [Company Name] will receive payment in lieu of any accrued but unused annual leave.
- Accrual is calculated at 1/12th of the annual entitlement for each complete month of service.
- Employees who have taken more leave than they have accrued may have the excess deducted from their final pay, in accordance with the Employment Rights Act 1996.
8. Carry-Over of Leave
- Employees may carry over a maximum of [5] days of unused annual leave into the next leave year, with the agreement of their line manager.
- Carried-over leave must be taken by [31 March of the following year] or it will be lost.
- Under the Working Time (Coronavirus) (Amendment) Regulations 2020, leave may be carried over in exceptional circumstances (e.g., where it was not reasonably practicable to take leave due to the impact of COVID-19 or similar disruptions).
9. Booking Procedure
- Leave requests should be submitted via [HR system / leave request form / email] at least [2 weeks] in advance.
- Managers will approve or deny requests based on business needs and fairness across the team.
- Periods of more than [5] consecutive working days require [4 weeks] advance notice.
- Annual leave should not be booked during notice periods without manager approval.
- Approved leave cannot be withdrawn by the employee without manager consent.
10. Unauthorised Absence
- Taking annual leave without following the booking procedure constitutes unauthorised absence.
- Unauthorised absence may result in disciplinary action in accordance with the company’s disciplinary policy.
- Employees who are unable to attend work due to illness should follow the sick leave policy rather than taking annual leave.
Legal Requirements Summary
| Requirement | Detail |
|---|---|
| Legislation | Working Time Regulations 1998 |
| Statutory minimum | 5.6 weeks (28 days for full-time) |
| Bank holidays | Can be included in the 5.6 weeks |
| Part-time entitlement | 5.6 × usual working week |
| Carry-over | Limited; employer can restrict |
| Payment on termination | Accrued but unused leave must be paid |
| Accrual (new starters) | Pro rata from first day |
Customisation Tips
- Offer more than the minimum. 28 days (including bank holidays) is the statutory minimum. Offering 25 days + bank holidays (33 total) is a common competitive practice.
- Define a clear leave year. Choose a leave year that aligns with your business cycle (calendar year, financial year, or employment start date).
- Add a “use it or lose it” provision. You can require employees to take all their leave within the leave year, except where carry-over is legally required.
- Consider a shut-down period. Some businesses close for a week at Christmas. This can count towards annual leave if the contract states this and adequate notice is given.
Common Mistakes to Accrue or Lose Leave?
Can we require employees to take leave during a Christmas shut-down?
Yes, you can require employees to take annual leave during a planned shut-down period, provided you give at least twice as many calendar days’ notice as the number of days the employee is required to take (e.g., 14 days’ notice for a 7-day shut-down). This is permitted under Regulation 13 of the Working Time Regulations 1998.
What happens if an employee is off sick during their annual leave?
If an employee falls ill during annual leave, they have the right to reschedule those days as sick leave. The employee must provide a fit note (if absent for 7+ days) and notify their manager. The annual leave days will be re-instated and can be taken at another time.
Can we refuse a leave request?
Yes, but only on the basis of business needs. You cannot refuse a leave request arbitrarily or in a way that is discriminatory. If a request is refused, explain the reason and offer alternative dates where possible.
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