Discretionary leave is any leave that an employer grants to an employee that is not required by statute. It is granted at the employer’s discretion and governed entirely by the terms of the employment contract or company leave policy. Examples include paid time off for volunteering, bereavement leave beyond the statutory minimum, study leave, wellness days and compassionate leave that exceeds legal requirements. Unlike statutory leave, discretionary leave can be withdrawn or modified by the employer at any time, provided proper notice is given.
Key Takeaways
- Discretionary leave is not required by law and exists at the employer’s discretion
- Once promised in a contract or policy, discretionary leave becomes a contractual obligation that cannot be unilaterally withdrawn
- Offering competitive discretionary leave packages helps attract and retain talent in tight labour markets
What Discretionary Leave Means for Employers
Discretionary leave is a powerful tool for employer branding and talent retention. In competitive labour markets, a generous discretionary leave policy can differentiate an employer from competitors who only offer statutory minimums. For example, offering three days of paid volunteering leave per year signals corporate social responsibility while giving employees meaningful time off.
The key legal risk is that once discretionary leave is promised, it becomes contractual. An employer cannot advertise five days of paid wellness leave and then withdraw it without amending the contract, which typically requires consultation and, in some cases, consideration. If an employer has consistently granted discretionary leave and then stops, employees may argue that the practice has become implied into their terms of employment.
Employers should also be aware that some forms of discretionary leave overlap with statutory rights. For instance, time off for dependants is a statutory right in the UK under the Employment Rights Act 1996, but employers may offer more generous provisions than the statutory minimum.
Discretionary Leave Rules by Region
| Country | Rule | Detail |
|---|---|---|
| UK | Statutory minimums exist, but extra leave is discretionary | Employers must provide 5.6 weeks annual leave; anything above this is discretionary unless contractually agreed |
| AU | NES provides minimum leave | Employers may offer additional leave (e.g. wellness days) at their discretion, but once included in a contract or policy, it becomes enforceable |
| US | No federal paid leave requirement | Most employers offer PTO policies that exceed federal minimums; these are discretionary unless contractually guaranteed |
How Discretionary Leave Works in Practice
A London-based consultancy offers its employees three types of discretionary leave beyond the statutory 28 days of annual leave: two days of paid volunteering leave, three days of paid study leave and one day of birthday leave. These are documented in the employee handbook and referenced in employment contracts.
When the consultancy faces financial pressures, the managing director considers removing the birthday leave. The HR team advises that this constitutes a contractual amendment. The firm consults with employees, offers a one-month notice period and adjusts the contract. No employees resign over the change, but the process highlights the importance of framing discretionary leave clearly as “granted at the company’s discretion” in the original policy language.
Common Mistakes with Discretionary Leave
- Not documenting discretionary leave in a written policy, leading to disputes about whether it was promised
- Assuming discretionary leave can be withdrawn without consultation or notice, risking constructive dismissal claims
- Confusing discretionary leave with statutory entitlements, particularly for bereavement and dependant leave
- Offering different discretionary leave terms to different employees without objective justification, creating discrimination risks
- Failing to set boundaries on discretionary leave, such as maximum days per year or approval requirements
FAQ
What is discretionary leave?
Discretionary leave is leave that an employer grants voluntarily, beyond what is required by law. It includes items like wellness days, volunteering leave, study leave and additional bereavement leave.
Can an employer change or remove discretionary leave?
Yes, but once discretionary leave is included in an employment contract or policy, it becomes a contractual term. The employer must follow proper amendment procedures, which typically involve consultation and notice.
Is discretionary leave taxable?
In most jurisdictions, paid discretionary leave is taxable as ordinary income. Unpaid discretionary leave does not attract tax but may affect other entitlements depending on the type of leave.
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