The SME’s guide to avoiding arguments over annual leave

As anyone in HR will know, annual leave is second only to someone’s salary in terms of priority and the emotion that can surround it. Some companies have a very fixed annual leave scheme, many will allow the buying and selling of some annual leave days, others will have a ‘take at-will policy’ (still in its infancy) and others will tolerate some negotiation for additional days during the recruitment process. 

Annual leave isn’t always a fixed post of leave at the beginning of the year. Many businesses will have an accrual scheme in place where people will gain their entitlement at the end of each month and some may accrue by hours. Were you aware that these systems operate? 

Whatever scheme you have, the last thing you should try to do is to bring any uncertainty into the discussion! Make sure people know their entitlement, how to book it and who is going to authorise it.

ACAS has an informative page on holidays. This includes the grounds on which an employer can refuse an employee to take holiday and guidance on how they can force an employee to take holiday. Anyone concerned about employers forcing employees to take holiday during the COVID-19 outbreak should read the ACAS website to understand how much notice they should be given:

“If your employer needs you to take your holiday on certain dates, they should tell you at least twice as many days before as the number of days they need you to take.

For example, your employer needs you to take 5 days of holiday while they're closed over Christmas. They should tell you this at least 10 days before the holiday starts.”

Booking leave: from paper to digital assistants

My first experience of booking annual leave was in a factory when I was 16. We had a shutdown in line with the potteries industry – I worked in Stoke-on-Trent in Staffordshire.  This shutdown was applied to the whole workforce and left very few days for the rest of the year to book through a discussion with a manager. 

Some years later, at another employer, I had to complete an annual leave request form which was signed by a manager and then sent to HR for entry onto the HRIS. 

I’ve gone onto experience many different annual leave booking schemes including paper-based and electronic. And now I get to book leave through a chatbot!

People First Booking Holiday

Transparency, TOIL and Types

Anything you can do to increase the transparency of annual leave and time off will greatly reduce the stress for managers and employees. An electronic leave management system will significantly enhance the employee experience and provide the manager with a better understanding of the location of their people before accepting a request for annual leave.

But just to increase the complexity of taking time off work, some businesses operate a Time Off in Lieu scheme – frequently referred to as TOIL. This works well where an employee and employer have a need for additional hours but don’t wish to increase the salary bill.  Instead, they agree that the employee can take time off at a future date that is convenient for both the employer and employee. For many, TOIL will be combined with annual leave so a week off could comprise of a day of TOIL and four days of annual leave.

If you’re going to introduce a TOIL scheme, please consider carefully who this is going to be available to. Is there a maximum number of hours anyone can accrue on TOIL? Are there any contractual changes needed to support this? And finally, how are you going to pay any outstanding TOIL hours for people who leave the organisation? Adding a TOIL scheme to an annual leave scheme increases a manager’s workload significantly more than just paying overtime.

There are many more types of absence that most businesses have available to their employees:

  • Maternity, adoption, paternity and parental leave
  • Bereavement leave
  • Jury duty, reservist leave or sabbatical leave

If you’re a growing business that is just coming out of using the statutory types of leave and wanting to develop your occupational schemes, plan these carefully and prepare policies that clearly articulate the boundaries of your schemes. Unfortunately, the work to support these schemes won’t end there as you should build in a yearly review to monitor any changes in the legislation so ensure your policies remain compliant. 

All these types of absence will ultimately affect your employee’s pay and could have knock-on effects to notice periods, SSP, pensions, benefits and expense management, and this is a key area to focus on when completing your pay run. 

MHR’s People First platform is available to support your business through growth and can deal with all these absence types.  We can also provide a fully compliant payroll system with electronic payslips that are available to employees through a mobile phone. For more information, download the People First brochure.


Andy Davies - https://people-first.com/

As an expert in human resources and a member of the CIPD, Andy is now responsible for developing the implementation strategy for People First partners. Passionate about the future of HR, employee engagement and performance management, Andy often writes and offers best practice advice on the need for archaic HR practices to evolve in order for organisations to stay relevant within the ever-changing world of work.

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