Should employees be compensated for unused holidays? - Mitrefinch


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Should employees be compensated for unused holidays?

Published: March 5, 2018

When it comes to taking annual leave, there are typically two types of employees. There are those who meticulously plan out their days off way in advance, lamenting that there still just isn’t enough time for them to do everything. Then there are the others – those who, come November, still have two weeks of holiday left but with no practical time to take them.

If you fall into the latter category, you might feel short-changed when the end of the year rolls around and your unused days can’t be carried forward to the next year. So, should employees be compensated for these holidays instead?


What the law says

The statutory minimum entitlement is 5.6 weeks for full-time employees, or a pro rata number of days’ paid holiday for part time employees. Taking remaining time off into the next calendar year is at the employer’s discretion. It’s not an automatic right, but if your workers receive statutory leave, they can carry over up to eight days if you agree to it. However, if there is a legitimate reason why the days off couldn’t be taken, such as maternity leave or a period of illness, employees are entitled to carry over some or all of the untaken leave to the following year.


If it’s simply a case of an employee forgetting to book their days off then any unused holiday will be written off. That is unless they can prove that they weren’t given adequate opportunity to book time off or had holiday requests declined – perhaps because it clashed with other employee’s holidays – in which case they may be able to carry it over indefinitely.


To pay or not to pay?

Generally speaking the only time an employee can get paid instead of taking time off is when they leave. Even if an employee is dismissed for gross misconduct, by law they still must be paid for any statutory leave that they have accrued. If any employer chooses to compensate employees for untaken leave, they can do so – it could definitely seem like an attractive option for both parties, as the employee receives additional income, whilst the employer won’t need to worry about finding holiday cover. That said, statutory leave is in place for the benefit of employees, and there can be detrimental effects to their health and wellbeing if they don’t take a sufficient amount of time out of the office. Overworking can lead to stress, low productivity and low morale, so encourage your employees to take all of holidays that they are entitled to. Sending out a quarterly reminder of how many days they have left to take or giving them control of their annual leave with time and attendance software will promote awareness.


Do you think employees should be compensated for unused holidays? Let us know what you think on Twitter or LinkedIn.

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