Calculating accrued annual leave

Knowing how much annual leave your employees have accrued is important for when they request time off, as well as for when they leave the company. However, calculating staff holiday accrual can be time-consuming, and tedious, particularly if you don’t have the proper systems in place.

This post looks at how holiday accrual works and how to calculate it your employees.

What is accrued annual leave?

Accrued annual is simply the amount of holiday an employee has built up, or earned, over the course of a year. When an employee starts at a company, or at the beginning of a year, they may have an annual leave allowance of 30 days, for instance, but, technically, they have to accrue their holiday entitlement over the course of the year.

This is what prevents a new employee from starting a new job and immediately requesting a three-week holiday: they won’t have accrued enough holiday to take that much time off (unless they arranged it with management during their recruitment process).  

Statutory minimum annual leave 

Before we talk about accruing annual leave, let’s start with a quick refresher on the statutory holiday entitlement.  In the UK, companies are legally obliged to offer their staff 5.6 weeks of annual leave. For those who work full-time, i.e. 5 days a week, this works out as 28 days a year. 

Part-time, casual, and temp workers are also entitled to the same amount of annual leave, albeit on a pro-rata basis in relation to how many days they work each week. 

In addition, an employee’s annual leave year entitlement isn’t affected by other types of leave, such as maternity leave. What’s more, employees still accrue holiday during while on maternity leave (as well as paternity and adoption leave).

How do employees accrue annual leave?

Employees start accruing 1/12 of their annual leave allowance each month, from their first day on the job. For example, if your company’s holiday allowance is 30 days, after 6 months, a full-time employee will have accrued 15 days. 

Another important factor in calculating accrued holiday is how your company’s holiday year” works. Some businesses keep it simple and make their leave year run from January – December. Other businesses base it on the financial year so that it runs from April – March. 

Calculating accrued holiday for an employee who starts part-way through the year

Calculating accrued annual leave becomes more complicated when the employee starts partway through the year. 

Let’s say your leave year runs from January 1 – December 31, and a new employee starts in April. Their holiday entitlement will be based on the period from April to the end of December, which is 9/12 of a full year’s holiday allowance. If they’re a full-time member of staff entitled to 28 days paid leave a year, the employee who starts in April will be entitled to 9/12 of 28, which is 21 days.

What if an employee leaves? 

If an employee leaves your company, you have to work out how much holiday they’ve accrued and taken to calculate their final month’s salary. If, on one hand, they’ve taken less holiday than they’ve accrued, they still some of their allowance left and need to be compensated for it. If, conversely, they’ve taken more annual leave than they’ve accrued, the difference should be deducted from their final salary payment.  

Tell your employees how annual leave accrual works

You need to inform new employees about how annual leave accrual works at your company, when they first start. The best way to do this is to include details of annual leave accrual to your company’s absence policy and their employment contract. This should include:

• How much annual leave they’re entitled to
• How annual leave is accrued
• Rules regarding the carryover of annual leave. 
• When your annual leave year starts and ends (Jan – Dec or April – March) 

Are you looking for a simple way to calculate accrued annual leave, as well as track your staff’s holiday allowance? Sign up for you free trial of ScheduleLeave today