Home » Blog » Can you pay your employees for holiday not taken?

It’s a question that arises, especially at this time of the year and here is the answer

Employees’ rights to annual leave

By law, all staff, whether permanent full-time, part-time or shift/casual workers, are entitled to 5.6 weeks holiday a year which works out at 28 days for a full-time employee.  This is inclusive of bank holidays or any other fixed closures determined by your company. For example, you might decide to close for a week every Christmas and this would be taken as holiday by employees. If bank holidays are included as part of the statutory minimum rather than additional, then this leaves 20 days a year holiday to be taken at a time convenient to both you and your employees.

Can you pay an employee in lieu of annual leave?

As the end of the holiday year draws to a close, you may get some employees who haven’t taken their full entitlement and request payment instead for that unused holiday. On the face of it, it sounds like a win win – the employee gets some extra money and you don’t have to arrange cover while they are on annual leave. If the end of the holiday year coincides with a particularly busy period for your business it can seem doubly attractive because you really don’t want staff off.

However, the statutory provision was designed to give employees paid time away from the work environment and there are sound health and well being reasons for them to have that time. For those reasons you are not allowed to contract out of the minimum holiday entitlement by paying them instead.

When can you pay them?

The only exception to the rule is when an employee is leaving your organisation. During their period of notice your worker may be able to take whatever is left of their leave entitlement. However, you can offer a payment in lieu for unused holiday instead.

If you give your employees more holiday than the statutory leave, then you can agree separate arrangements for what happens with any unused additional leave. This will normally be laid out in their contract of employment or employee handbook.

It is important to monitor the holiday throughout the year and not just in the last months.  So look at the employees with holiday not booked for this year and put dates in your diary throughout the year to check the holiday is being used.

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