UK Annual Leave Regulations

Annual leave is one of the most fundamental employment rights in the United Kingdom. For employers, understanding and correctly applying the rules around holiday entitlement is essential — not only to remain legally compliant but also to maintain a fair, transparent workplace that supports staff wellbeing and retention.

Over the last few years, there have been significant changes to annual leave regulations, including landmark court decisions on holiday pay calculations and the introduction of new provisions through the Employment Rights Bill 2025. This guide sets out the current position for UK employers.

Statutory Annual Leave Entitlement

The Working Time Regulations 1998 (WTR) provide the legal foundation for annual leave in the UK. Under Regulation 13, almost all workers are entitled to a minimum of 5.6 weeks of paid holiday per year. For a worker on a standard five-day week, this amounts to 28 days per annum, which is the statutory maximum an employer is required to provide under the WTR.

The categories of workers generally entitled to statutory annual leave include:

Employees with permanent employment or regular hours
Workers with irregular or variable hours
Agency workers
Workers on zero-hours contracts

It is important to note that the statutory entitlement is measured in weeks (5.6), not days. The 28-day figure applies only to workers who work five days per week. Part-time workers receive their entitlement on a pro-rata basis, calculated using the formula:

Number of days worked per week x 5.6 = annual leave entitlement in days
For example, a worker on a three-day week: 3 x 5.6 = 16.8 days per year

Employers may choose to include bank and public holidays within the 28-day statutory minimum. However, there is no separate legal right to time off on bank holidays — this is a matter of contract. An employer who includes the eight standard bank holidays in England and Wales within the 28-day entitlement is acting lawfully, provided this is clearly stated in the employment contract.

Bank Holidays and Public Holidays

A common source of confusion for employers is the treatment of bank holidays. The key points are:

Bank holidays can be included as part of the 5.6 weeks' statutory entitlement — they do not have to be given in addition to the 28 days
There is no automatic right for workers to take bank holidays off; the employer can require staff to work on these days, provided the contract allows it
If an employer grants bank holidays on top of the 28-day minimum, those additional days are contractual (not statutory) and may be subject to different rules regarding carry-over and payment on termination
Part-time workers must not be treated less favourably — if full-time staff receive bank holidays in addition to 28 days, part-time staff should receive a pro-rata equivalent to avoid indirect discrimination under the Equality Act 2010

Holiday Pay Calculation

The question of what constitutes correct holiday pay has been one of the most litigated areas of UK employment law in recent years. Following a series of Employment Appeal Tribunal and Supreme Court decisions, the law now requires that holiday pay reflects a worker's normal remuneration, not just basic pay.

Since April 2020, the reference period for calculating a week's pay for workers with variable earnings was extended from 12 weeks to 52 weeks (or the total number of complete weeks of employment if the worker has been employed for fewer than 52 weeks). This change was introduced by the Employment Rights (Employment Particulars and Paid Annual Leave) (Amendment) Regulations 2018 and applies to leave years beginning on or after 6 April 2020.

When calculating holiday pay, employers should include:

Basic salary or hourly rate
Regular overtime (both compulsory and voluntary, where it has become a normal part of the worker's pay pattern)
Commission payments that are intrinsically linked to the performance of tasks
Regular allowances and supplements (such as shift premiums or standby payments)

The distinction between the four weeks' leave derived from the EU Working Time Directive (Regulation 13) and the additional 1.6 weeks of domestic leave (Regulation 13A) remains relevant, as different rules on carry-over can apply to each tranche.

Accrual During Sickness, Maternity, and Other Leave

Under UK law, workers continue to accrue statutory annual leave during periods of:

Sick leave — a worker on long-term sick leave continues to accrue all 5.6 weeks of statutory holiday
Maternity leave — statutory holiday accrues throughout both ordinary and additional maternity leave (up to 52 weeks)
Paternity leave — the two-week statutory paternity leave period counts towards continuous employment and holiday accrual
Adoption leave — treated in the same way as maternity leave for accrual purposes
Shared parental leave — holiday continues to accrue during any period of shared parental leave

Workers may also request to take annual leave concurrently with sick leave, which has important implications for holiday pay since statutory sick pay (SSP) is typically lower than normal holiday pay. Employers should have a clear policy addressing how such requests are handled.

Carry-Over Rules

The rules on carrying over unused annual leave are among the most nuanced aspects of UK holiday law. The general position is:

The 1.6 weeks of additional domestic leave (Regulation 13A) cannot be carried over into the next leave year unless the employer's contract or policy permits it
The four weeks of leave derived from the Working Time Directive (Regulation 13) can be carried over where a worker has been unable to take it due to sickness — this right was established by the Court of Justice of the European Union in Stringer v HMRC and is retained in UK law
Where a worker has been on long-term sick leave, the carry-over of Regulation 13 leave is limited to 18 months from the end of the leave year in which it accrued

Employers may offer more generous carry-over provisions as a contractual benefit. Many organisations allow staff to carry over a set number of days (commonly five to ten) into the following leave year, subject to management approval.

Zero-Hours and Irregular-Hours Workers

Workers on zero-hours contracts and those with irregular working patterns are entitled to the same 5.6 weeks of statutory annual leave as any other worker. The practical challenge lies in calculating what that entitlement looks like in hours or days.

The traditional approach has been to calculate entitlement using the 12.07% method — that is, for every hour worked, a worker accrues 12.07% of an hour of holiday (derived from 5.6 weeks divided by 46.4 working weeks). Following legislative changes, from April 2024 the Government introduced a statutory accrual method for irregular-hours and part-year workers, calculated at the end of each pay period based on hours actually worked.

Employers must ensure that zero-hours workers are actively informed of their right to take paid holiday and are not discouraged from doing so. The practice of rolling up holiday pay into a worker's hourly rate remains technically unlawful under the WTR, although recent reforms have permitted rolled-up holiday pay for irregular-hours and part-year workers from April 2024 onwards.

The Employment Rights Bill 2025

The Employment Rights Bill 2025, introduced by the current Government, represents the most significant reform of UK employment law in a generation. While the Bill covers a wide range of topics — from unfair dismissal reforms to trade union rights — several provisions are directly relevant to annual leave and holiday pay.

Key changes proposed or enacted through the Bill and its accompanying secondary legislation include:

Strengthening protections for workers in precarious employment, including enhanced rights for zero-hours and agency workers regarding predictable working patterns
Clarification of the rules around rolled-up holiday pay, building on the reforms introduced in 2024
Enhanced enforcement powers for the proposed Fair Work Agency, which will have the authority to investigate holiday pay underpayments and take enforcement action on behalf of workers
Provisions addressing the interaction between family-related leave and annual leave accrual, ensuring greater consistency and fairness

Employers should review their annual leave policies in light of the Employment Rights Bill 2025 to ensure they are prepared for the changes as they come into force. The Employment Rights Act 1996, which sets out many of the fundamental rights relating to pay and leave, will be amended by several provisions in the Bill.

Employer Obligations

Employers have a number of legal obligations when it comes to annual leave:

Provide written particulars — under the Employment Rights Act 1996 (as amended), the employment contract or written statement of terms must specify the worker's holiday entitlement, including any rules on carry-over, how public holidays are treated, and how entitlement is calculated on termination
Maintain accurate records — while the WTR do not prescribe a specific record-keeping format, employers must be able to demonstrate that workers are receiving their statutory minimum entitlement
Pay accrued but untaken holiday on termination — when employment ends, workers are entitled to a payment in lieu of any accrued but untaken statutory leave
Avoid unlawful deductions — any deductions for holiday taken in excess of accrued entitlement must be clearly authorised in writing, typically through a contractual clause
Ensure no detriment — workers must not suffer any detriment for exercising their right to take annual leave

How Policy Pros Can Help

Navigating annual leave regulations can be complex, particularly for businesses with mixed workforces including full-time, part-time, and zero-hours staff. Our team writes clear, compliant HR policies and procedures that reflect the latest legislation and case law, giving your managers the confidence to handle holiday entitlement correctly.

Whether you need a standalone annual leave policy, a comprehensive employee handbook, or a full review of your existing HR documentation, our policy and procedure writing services are tailored to your organisation's size, sector, and workforce structure. We work with UK businesses of all sizes, from SMEs to large public sector organisations.

Please get in touch below to discuss your requirements.