A leave policy is a written document that sets out the rules, entitlements, and procedures for all types of employee absence. It translates legal obligations into practical guidance your managers and employees can follow. A well-drafted leave policy reduces disputes, ensures consistent treatment, and creates a clear audit trail for compliance. Without one, every leave request becomes a negotiation.

This guide walks you through creating a leave policy from scratch — covering the essential sections, common mistakes, and how to make it work in practice.

Key Takeaways

  • A leave policy must cover all absence types — annual leave, sick leave, parental leave, and any additional leave your organisation offers.
  • It should clearly state entitlements, accrual rules, notice periods, and approval processes.
  • The policy must comply with statutory minimums — it cannot offer less than the law requires.
  • Communication matters as much as drafting — a policy nobody reads is worse than no policy.
  • Review and update the policy annually to reflect changes in law and practice.

Step 1: Define the scope

Before drafting, answer three questions:

  1. Who does it apply to? All employees? Does it distinguish between full-time, part-time, casual, and zero-hours workers?
  2. What leave types does it cover? Statutory leave (annual, sick, parental) and any additional leave the company provides (compassionate, study, wellness).
  3. When does it take effect? Is there a transition period for existing employees?

The scope should be stated at the beginning of the policy so there is no ambiguity about who it covers.

Step 2: Set out statutory entitlements

The policy must state the legal minimums. These are the floor, not the ceiling:

Annual leave

  • Statutory minimum: 5.6 weeks (28 days for a five-day worker)
  • Whether bank holidays are included in the entitlement
  • The leave year period (e.g., January to December, or April to March)

Sick leave

  • Statutory Sick Pay (SSP): £116.75 per week (2025/26)
  • Eligibility criteria and the three-day waiting period
  • Fit note requirements

Parental leave

  • Maternity leave: 52 weeks (39 weeks paid SMP)
  • Paternity leave: 1 or 2 weeks at SPP
  • Shared parental leave: up to 50 weeks shared between parents
  • Adoption leave: similar to maternity leave

Other statutory leave

  • Time off for dependants
  • Jury service
  • Antenatal appointments

Step 3: Add contractual enhancements

Beyond the statutory minimums, set out what the company provides:

  • Enhanced annual leave (e.g., 30 days plus bank holidays)
  • Enhanced sick pay (e.g., full pay for 4 weeks, half pay for 4 weeks)
  • Enhanced maternity or paternity pay
  • Compassionate leave
  • Study or volunteer leave
  • Wellness or mental health days

Each enhancement should state the entitlement, eligibility criteria (e.g., after how many months of service), and any conditions (e.g., manager approval required).

Step 4: Define accrual and carry-over rules

Annual leave accrual

  • How leave accrues (monthly, from start date, pro-rata for part-time)
  • The accrual rate for irregular-hours and part-year workers (12.07% under the 2024 WTR amendments)

Carry-over

  • What happens to unused leave at the end of the leave year
  • Whether contractual leave can carry over (statutory minimum of 20 days cannot, unless the employer prevented the employee from taking it)
  • Any deadline for using carried-over leave

Accrual during other leave

  • Whether annual leave accrues during sick leave, maternity leave, or other statutory absences (the answer under the WTR is yes)

Step 5: Set out the approval process

Clearly state:

  1. How employees request leave — through the leave management system, with notice periods for each type.
  2. Who approves — direct line manager, department head, or both.
  3. Notice periods — minimum notice for planned leave (e.g., 2 weeks for annual leave, 15 weeks for maternity).
  4. Refusal grounds — what constitutes a reasonable refusal (e.g., business needs, minimum staffing levels, insufficient notice).
  5. Appeal process — how an employee can challenge a refusal.

Step 6: Address special circumstances

Unplanned absence

  • Procedure for reporting sickness on the first day (call, text, email)
  • When a fit note is required
  • Return-to-work interview process

Unauthorised absence

  • Definition of unauthorised absence (no approval, no fit note)
  • Consequences (disciplinary process, unpaid leave)
  • How unauthorised absence affects pay

Long-term absence

  • When occupational health referral is appropriate
  • How pay changes during extended absence
  • Return-to-work process after long-term sickness

Flexible working and remote employees

  • How leave works for remote or hybrid employees
  • Whether bank holidays apply differently for employees in other countries or time zones

Step 7: Include data protection provisions

State:

  • How absence data is stored and who has access
  • The lawful basis for processing (legitimate interest, legal obligation)
  • Employee rights to access their own data
  • Retention period for absence records

Step 8: Communicate the policy

A policy that lives in a folder nobody opens is useless. Communication steps:

  1. Publish the policy in the employee handbook, intranet, and onboarding materials.
  2. Explain it during induction for new starters.
  3. Remind managers during training on handling leave requests.
  4. Reference it in the employment contract.
  5. Review annually and communicate any changes.

Common leave policy mistakes

1. Offering less than the statutory minimum

The policy cannot reduce entitlements below what the law provides. If the contract offers 20 days plus bank holidays, the statutory floor is still 28 days for a five-day worker.

2. Vague refusal criteria

Managers need clear criteria for approving and declining leave. “At management discretion” creates inconsistency and dispute risk.

3. Not addressing carry-over

If the policy does not state the carry-over rules, employees may assume they can carry over all unused leave — or that none can be carried over. Both assumptions are wrong without clear rules.

4. Ignoring part-time and irregular-hours workers

Part-time workers accrue leave on a pro-rata basis. Irregular-hours workers accrue at 12.07%. The policy must account for both.

5. Not updating the policy

Employment law changes. The 2024 WTR amendments to holiday pay and accrual for irregular-hours workers are a recent example. An outdated policy is a compliance risk.

Putting it into practice

Five checks cover most leave policy creation:

  1. List every absence type with the statutory minimum and any contractual enhancements.
  2. Define accrual, carry-over, and pay rules for each type.
  3. Set out the request and approval process with clear notice periods and refusal criteria.
  4. Address special circumstances: unplanned absence, long-term sickness, and remote workers.
  5. Communicate the policy widely and review it annually.
You can take advantage of the free 14 days trial and explore Leave Balance.

A leave management system that encodes your policy in software — applying accrual rules, carry-over limits, and approval workflows automatically — removes the ambiguity that causes disputes and ensures every employee is treated consistently.

Frequently Asked Questions

What should a leave policy include?

A leave policy should cover all absence types, statutory and contractual entitlements, accrual and carry-over rules, the request and approval process, special circumstances (unplanned and long-term absence), and data protection provisions.

How often should a leave policy be reviewed?

At least annually, and whenever there is a change in employment law. The 2024 WTR amendments and the introduction of neonatal care leave are examples of changes that required policy updates.

Does a leave policy need to cover remote workers?

Yes. Remote and hybrid workers have the same leave entitlements as office-based workers. The policy should clarify how they request and take leave, and how bank holidays apply.

Can a leave policy offer less than the statutory minimum?

No. The statutory minimum is a legal floor. A policy that offers less is unlawful, even if the employee agrees to it in the contract.

How do you communicate a new leave policy?

Publish it in the employee handbook and intranet, explain it during onboarding, train managers on handling requests, and reference it in employment contracts.

This article is general information, not legal advice.

Last updated: 26 July 2026.