Annual Leave Entitlements in the UK: The Complete Employer's Guide for 2026

Getting annual leave entitlements wrong is one of the most common — and most expensive — employment law mistakes UK employers make. HMRC and employment tribunals see thousands of claims each year related to underpaid or miscalculated holiday, and the penalties can be severe.

Whether you are running a small business with a handful of staff or managing HR for a multi-site organisation, understanding exactly how UK annual leave works is non-negotiable. This guide covers everything you need to know for 2026, including the statutory minimum, how to calculate entitlements for part-time and irregular-hours workers, bank holiday rules, carry-over provisions, and the most common pitfalls employers fall into.

The Statutory Minimum: 5.6 Weeks Explained

Under the Working Time Regulations 1998 (which implement the EU Working Time Directive into UK law), almost all workers in the UK are entitled to a minimum of 5.6 weeks of paid annual leave per year. For a full-time worker on a standard five-day week, that translates to 28 days.

This 5.6-week figure is made up of two components:

• 4 weeks (20 days) derived from the original EU Working Time Directive requirement
• 1.6 weeks (8 days) added by the UK government in 2007 under the Additional Leave Regulations

This distinction matters because different rules apply to each portion when it comes to carry-over and payment in lieu — more on that below.

Key Points About the Statutory Minimum

• The 28-day cap applies regardless of how many days per week someone works. A six-day-per-week worker still gets 5.6 weeks, which equals 33.6 days, but the statutory entitlement is capped at 28 days.
• Bank holidays can be included within the 28-day entitlement. There is no automatic legal right to have bank holidays off on top of statutory annual leave. Many employers do offer them additionally, but it is not a legal requirement.
• The entitlement applies to workers, not just employees. This includes agency workers, zero-hours contract workers, and most casual staff.
• The entitlement accrues from day one of employment. There is no qualifying period.

Calculating Leave for Part-Time Workers

Part-time workers are entitled to the same 5.6 weeks of annual leave, pro-rated to their working pattern.

The formula is straightforward:

Days worked per week x 5.6 = annual leave entitlement in days

For example:

• A worker doing 3 days per week gets 3 x 5.6 = 16.8 days of annual leave
• A worker doing 2.5 days per week gets 2.5 x 5.6 = 14 days of annual leave

What About Workers With Varying Hours?

For workers whose hours change from week to week — including zero-hours contract workers and casual staff — the calculation becomes more complex. Since April 2020, and reinforced by subsequent guidance, the recommended approach is to use a 52-week reference period (previously 12 weeks) to calculate the average weekly hours.

Here is how it works:

1. Look back at the previous 52 weeks in which the worker was paid
2. Calculate the average hours worked per week over that period
3. Use that average to determine the holiday entitlement

If there are weeks in the 52-week window where no work was done (and no pay was received), those weeks are skipped and you continue looking back until you have 52 paid weeks, up to a maximum of 104 weeks.

The 12.07% Accrual Method

Many employers use an accrual-based approach for irregular-hours workers, applying a rate of 12.07% of hours worked. This percentage is derived from dividing 5.6 weeks of holiday by the remaining 46.4 working weeks in a year (5.6 / 46.4 = 0.1207).

For example, if a casual worker does 20 hours in a week, they accrue 20 x 12.07% = 2.414 hours of holiday for that week.

If that worker is paid £12 per hour, their holiday pay accrual for the week is 2.414 x £12 = £28.97.

This method is widely used and accepted, though it is worth noting that the Supreme Court’s 2022 ruling in Harpur Trust v Brazel initially cast doubt on it. That ruling found that part-year workers (such as term-time only staff) should receive 5.6 weeks of holiday based on their average weekly pay rather than a pro-rated amount based on hours worked. The practical effect was that a term-time worker could receive proportionally more holiday pay than a full-year colleague doing similar total hours — an outcome many employers considered unfair.

However, the government responded with the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023, which came into force on 1 January 2024. These regulations:

• Introduced a new statutory definition of irregular-hours workers and part-year workers
• Confirmed that the 12.07% accrual method is lawful for these worker types
• Effectively reversed the Brazel ruling for leave years beginning on or after 1 April 2024
• Allowed employers to use rolled-up holiday pay for irregular-hours and part-year workers — meaning the holiday pay can be paid as an uplift on each payslip rather than when holiday is actually taken

This is a significant shift. Before January 2024, rolled-up holiday pay was considered unlawful following the European Court of Justice ruling in Robinson-Steele. Now, for workers who fall within the new irregular-hours or part-year definitions, it is a legitimate and often simpler approach.

The 1/12th Method: Monthly Accrual for Standard Employees

For full-time and regular part-time employees, the most common accrual method is the 1/12th method. The employee accrues one-twelfth of their annual entitlement for each complete month of employment.

How to Calculate It

Annual entitlement ÷ 12 = monthly accrual

For a full-time employee with 28 days of statutory leave:

28 ÷ 12 = 2.33 days per month

For an employee with a contractual entitlement of 25 days plus 8 bank holidays (33 days total):

33 ÷ 12 = 2.75 days per month

Worked Example: New Starter Mid-Year

Sarah joins your company on 1 July. Your leave year runs from 1 January to 31 December. She works full-time and is entitled to 28 days per year.

From 1 July to 31 December = 6 complete months

28 ÷ 12 x 6 = 14 days of leave entitlement for the remainder of the year.

If Sarah joins on 15 July, you have a choice: round to the nearest complete month, or calculate on a daily basis. The daily approach divides the annual entitlement by 365:

28 ÷ 365 = 0.0767 days per calendar day

From 15 July to 31 December = 170 calendar days

170 x 0.0767 = 13.04 days

Most employers round this to 13 or 13.5 days.

First-Year Accrual Restriction

During the first year of employment, an employee only has the right to take leave that has actually accrued. This means in months one through twelve, you can lawfully refuse a request to take more leave than has been built up so far. By the end of month two, a full-time employee with 28 days entitlement has accrued approximately 4.67 days — so a request for a full week off in month two can legitimately be refused.

After the first year, the full annual entitlement is typically available from the start of each leave year, though many employers still use an accrual-based system throughout employment for simplicity.

If an employee takes more leave than they have accrued and then leaves before the end of the year, you can claw back the overpayment — but only if you have a clear contractual provision allowing this. Always include a clawback clause in your contracts of employment.

Bank Holidays and Annual Leave

This is one of the most misunderstood areas of UK employment law.

There is no statutory right for employees to have bank holidays off. Whether or not an employee gets bank holidays off — and whether those days count towards their annual leave entitlement — depends entirely on their contract of employment.

Common approaches include:

• Bank holidays on top: The employee gets 20 days of annual leave plus 8 bank holidays, totalling 28 days. This meets the statutory minimum with the bank holidays forming the additional 1.6 weeks.
• Bank holidays included: The employee gets 28 days total, including bank holidays. They must use 8 of their days for bank holidays.
• Bank holidays plus extra: Many employers offer more than the statutory minimum, for example 25 days plus bank holidays (33 days total).

Part-Time Workers and Bank Holidays

Special care is needed when calculating bank holiday entitlements for part-time workers. If full-time staff receive bank holidays on top of their basic entitlement, part-time staff must receive the pro-rated equivalent — even if the bank holiday does not fall on one of their working days.

For instance, if a full-time worker gets 20 days plus 8 bank holidays (28 total), a part-timer working 3 days per week should get:

• 28 days x (3/5) = 16.8 days total

If bank holidays fall on days they do not work, they should still receive the proportional benefit, either as additional leave days or as pay.

Failing to do this properly is a common source of indirect discrimination claims, as part-time workers are disproportionately women.

Carry-Over Rules: What Changed and What Stuck

Carry-over of annual leave has become significantly more complex since the COVID-19 pandemic. Here is the current position:

The Default Rule

Under the Working Time Regulations, the basic position is:

• The 4-week EU-derived leave cannot normally be carried over to the next leave year (except in specific circumstances established by case law)
• The additional 1.6-week UK leave can be carried over if there is a relevant agreement in place (a workforce or collective agreement)

The COVID-Era Carry-Over Relaxation

During the pandemic, the government introduced emergency regulations allowing workers to carry over up to 4 weeks of statutory leave into the following two leave years if it was not reasonably practicable to take it due to the effects of coronavirus.

The last of these carried-over days expired by 31 March 2024 for most workers, so this provision is no longer relevant for 2026. However, the principle it established — that carry-over should be permitted when circumstances genuinely prevent workers from taking leave — has influenced subsequent case law and employer best practice.

Case Law Carry-Over Rights

Several important principles from European and UK case law remain in effect:

• Sickness absence: If a worker cannot take annual leave due to sickness, they can carry over the 4-week EU-derived entitlement. Following the NHS Leeds v Larner (2012) ruling, the employer must actively inform workers of this right.
• Maternity/family leave: Workers on maternity, paternity, adoption, or shared parental leave can carry over any untaken annual leave.
• Employer failure to facilitate leave: Under Max-Planck-Gesellschaft v Shimizu (as applied in the UK), if an employer does not actively encourage workers to take their leave and inform them that untaken leave will be lost, the leave carries over automatically. This places a positive duty on employers.

Practical Recommendations for 2026

1. Have a clear written carry-over policy in contracts or the staff handbook
2. Actively monitor leave balances throughout the year
3. Send reminders to staff who have significant untaken leave — document that you have done so
4. Allow reasonable carry-over (many employers permit 5 days) to balance business needs with employee wellbeing
5. Never allow a “use it or lose it” approach without first ensuring you have met your duty to encourage leave-taking

Holiday Pay: Getting It Right

Calculating holiday pay incorrectly is another frequent source of claims. The key principle is that workers should not be financially disadvantaged for taking annual leave.

What Counts Towards Holiday Pay

For the 4-week EU-derived leave, holiday pay must reflect normal remuneration, which includes:

• Basic salary
• Regular overtime (both compulsory and voluntary, if it is regular and settled)
• Commission payments
• Regular bonuses and allowances
• On-call and standby payments

This was established through a series of cases including Bear Scotland v Fulton (2015) and East of England Ambulance Service v Flowers (2019).

For the additional 1.6-week UK leave, employers can pay basic salary only, unless the contract provides otherwise.

The Reference Period

Holiday pay for workers without fixed pay should be calculated using the 52-week reference period, looking back at weeks in which pay was received (skipping unpaid weeks, up to 104 weeks back).

Accrual During Long-Term Sickness

This is one of the trickiest areas of UK leave law, and one where employers most frequently get things wrong.

The Core Rule

Annual leave continues to accrue during sick leave. This applies to both short-term and long-term sickness absence. An employee who is off sick for six months still accrues their full entitlement during that period. There is no mechanism under the Working Time Regulations to pause accrual because someone is unwell.

Carry-Over: Regulation 13 vs Regulation 13A

When an employee on long-term sick leave accrues a full year of holiday but cannot take it, the carry-over question depends on which portion of the entitlement is involved:

• Regulation 13 leave (4 weeks / 20 days): Following the European Court of Justice ruling in Stringer v HMRC and subsequent UK case law, employees on long-term sick leave must be allowed to carry over the 4-week EU-derived entitlement. This leave does not lapse simply because the employee was unable to take it due to sickness. However, the carry-over right is not unlimited — case law establishes an 18-month carry-over window from the end of the leave year in which it accrued.
• Regulation 13A leave (1.6 weeks / 8 days): The additional 1.6 weeks is subject to a “use it or lose it” rule. Employers can include a contractual provision stating that this portion does not carry over, even during sickness.

Worked Example: Long-Term Sick Leave

Emma has been on sick leave since February 2025. Her leave year runs January to December. She is entitled to 28 days per year.

By 31 December 2025, she has accrued 28 days of leave but has taken none.

• She can carry over 20 days (Regulation 13) into 2026, and these must be used within 18 months (by 30 June 2027)
• The remaining 8 days (Regulation 13A) may lapse if the employer’s policy says so

If Emma returns to work in March 2026, she has her carried-over 20 days from 2025 plus her newly accruing 2026 entitlement. Managing these overlapping balances is where a proper leave tracking system becomes essential.

Accrual During Maternity, Paternity, and Other Family Leave

Maternity Leave

Annual leave continues to accrue throughout the entire period of ordinary maternity leave (26 weeks) and additional maternity leave (a further 26 weeks) — so for the full 52 weeks if the employee takes the maximum.

This means an employee on a full year of maternity leave accrues their complete annual leave entitlement. For an employee with 28 days of leave, that is 28 days accrued during maternity on top of any leave they had not yet used before going on maternity.

Employers and employees often agree to one of these arrangements:

• The employee takes accrued leave before maternity leave starts (tagging it on to the beginning)
• The employee takes accrued leave at the end of maternity leave (extending their absence)
• The employee is paid in lieu for accrued leave — though this is only permitted on termination of employment under the Working Time Regulations, so most employers use the first or second approach

Paternity Leave

Annual leave accrues during the two weeks of statutory paternity leave as normal.

Shared Parental Leave

Annual leave accrues throughout any period of shared parental leave. Since shared parental leave can last up to 50 weeks (minus any maternity or adoption leave taken), the accrual can be substantial. Employers should discuss leave arrangements with the employee before shared parental leave begins to avoid a large balance building up.

Adoption Leave

The rules mirror maternity leave exactly. Annual leave accrues throughout the entire adoption leave period, including both ordinary and additional adoption leave.

Statutory vs Contractual Leave: Why the Distinction Matters

Many employers offer leave above the statutory minimum — for example, 25 days plus bank holidays (33 days total). Understanding how different rules apply to statutory versus contractual leave is important, particularly for carry-over and sickness scenarios.

Statutory Leave (5.6 Weeks / 28 Days)

• Accrual and entitlement are governed by the Working Time Regulations
• Carry-over rules are partially fixed by law (especially the 4-week Regulation 13 portion)
• Cannot be replaced by a payment in lieu except on termination
• Holiday pay for the Regulation 13 portion must reflect normal remuneration, including regular overtime, commission, and bonuses

Contractual Leave (Anything Above 28 Days)

• Governed entirely by the employment contract, not statute
• The employer has full discretion over carry-over, accrual rates, and forfeiture rules
• Can include “use it or lose it” provisions without restriction
• Can be structured to accrue differently (e.g., only after a probation period, or at a different monthly rate)

Worked Example

Your company offers 33 days of leave (25 days plus 8 bank holidays). An employee has 6 unused days at the end of the leave year.

• The first 28 days are statutory. The carry-over rules for any unused portion of these 28 days are governed by a mix of legislation and case law — the Regulation 13 portion must carry over if the employee was prevented from taking it, and the Regulation 13A portion may lapse.
• The remaining 5 days above statutory are contractual. You can set whatever rules you like — carry over up to 3 days, lose the rest, or any other arrangement your contract specifies.

Separating statutory and contractual leave in your tracking system is essential for applying the correct carry-over rules to each portion.

Choosing Your Leave Year Start Date

There is no legal requirement for the leave year to follow the calendar year. Common leave year start dates include:

• 1 January — aligns with the calendar year, intuitive for most employees
• 1 April — aligns with the UK tax year and financial year for many organisations
• Employment start date — each employee’s leave year starts on their anniversary

Uniform vs Rolling Leave Years

A uniform leave year (the same start date for everyone) is simpler to manage. It avoids the administrative headache of tracking different leave years for each employee, makes company-wide reporting straightforward, and reduces errors in carry-over calculations.

A rolling leave year (based on each employee’s start date) can be fairer for employees who join at different times of the year, as they always get a full year to use their entitlement. However, it is significantly harder to administer — especially once you are tracking carry-over, sickness accrual, and multiple leave types.

If your contract of employment does not specify a leave year, the default under the Working Time Regulations is the anniversary of the employee’s start date.

Changing Your Leave Year

If you want to change from one leave year to another (for example, moving from anniversary-based to a fixed January start), you need to handle the transition carefully to ensure no employee loses entitlement. Calculate the pro-rata entitlement for the short transitional period, communicate the change clearly, and confirm the arrangement in writing. Getting this wrong can lead to employees being short-changed on leave — and potential tribunal claims.

Common Employer Mistakes to Avoid

Based on employment tribunal trends and ACAS guidance, here are the most frequent annual leave compliance failures:

1. Not Providing Leave to “Workers”

Many organisations only offer annual leave to employees on permanent contracts. However, the statutory entitlement applies to all workers, including:

• Zero-hours contract staff
• Agency workers
• Casual and seasonal workers
• Some freelancers and contractors (depending on their employment status)

The Supreme Court’s decision in Uber BV v Aslam (2021) reinforced that many individuals classified as self-employed are in fact workers entitled to annual leave.

2. “Rolled-Up” Holiday Pay

Paying an enhanced hourly rate that supposedly includes holiday pay — instead of providing actual paid time off — was ruled unlawful by the European Court of Justice in Robinson-Steele v RD Retail Services (2006). However, in a significant policy shift, the UK government re-legalised rolled-up holiday pay for irregular-hours and part-year workers from January 2024 under the Employment Rights (Amendment) Regulations 2023. For regular-hours workers, rolled-up holiday pay remains unlawful.

3. Failing to Track Accrued Leave

If you cannot demonstrate that workers have received their full statutory entitlement, the burden of proof falls on you. Employers must keep adequate records.

4. Ignoring the First Year of Employment

Annual leave accrues from day one. Some employers mistakenly require a qualifying period before workers can take leave. While you can restrict when leave is taken during a probationary period, you cannot deny the accrual itself.

5. Incorrect Payment on Termination

When employment ends, workers are entitled to payment in lieu of any accrued but untaken annual leave. This must include the full statutory entitlement, pro-rated to the point of termination.

Looking Ahead: Employment Rights Bill

The Employment Rights Bill, which has been progressing through Parliament, may introduce further changes to annual leave rules. Key provisions to watch include:

• Strengthened protections for zero-hours and irregular-hours workers
• Potential consolidation of the dual (4-week and 1.6-week) leave system
• Enhanced enforcement mechanisms through a new Fair Work Agency

Employers should monitor these developments and be prepared to update policies when changes come into force.

How Leave Balance Helps You Stay Compliant

Managing annual leave entitlements across different worker types, contract patterns, and regulatory requirements is genuinely complex — and the cost of getting it wrong ranges from tribunal claims to damaged employee relations.

Leave Balance takes the guesswork out of annual leave management:

• Automatic entitlement calculations for full-time, part-time, and irregular-hours workers
• Pro-rated bank holiday tracking that ensures part-timers receive their fair share
• Carry-over management with configurable rules and automatic reminders
• Multi-country support for organisations with staff across the UK and beyond
• Slack and Teams integration so leave requests and approvals happen where your team already works

At just $10/month with unlimited employees and policies, there is no reason to risk compliance failures with spreadsheets and manual calculations.