Can employees take holiday during their notice period?

How familiar are you with an employee's rights to take holiday during their notice period? If you have a small team and short notice period, it’s important to get to grips with the topic.

Employees who hand in their notice and intend to use all remaining holiday can unintentionally disrupt business for you and the rest of the team.

As their employer, you must be transparent with your departing employee and tell them what holiday they are entitled to during their notice period. In this post we share the detail behind holiday entitlements after giving notice.

Can an employee take holiday during their notice period?

Yes. An employee may request to take whatever is left of their statutory annual leave

But it's how much holiday they've accrued each month that matters. And this depends on how much of the holiday year has passed. For example, they won’t be able to use a full years’ worth of allowance if the holiday year only started 3 months ago.

An employee’s holiday entitlement begins to accrue from their first day of employment and accrues each month in relation to their annual leave entitlement.

For example, if your holiday year runs from January to December and the employee leaves in April, they will have accrued 4/12ths of their holiday entitlement. Based on an annual leave allowance of 25 days, this means they are entitled to have taken 8.3 days of holiday. This means they can take up to 8.3 days of time off.

An easy way of calculating an employee’s remaining leave entitlement is to use our holiday calculator. Use the ‘pro rata’ function to adapt your employee’s holiday entitlement in line with their leave date.

Can employers refuse an annual leave request during an employee's notice period?

You can refuse a request for annual leave during a notice period for valid business reasons – just as you would for any other holiday request. But you must be careful; if you don’t have a valid reason, your refusal could be seen as discriminatory.

Can an employer make an employee use all remaining holiday entitlement during their notice period?

Yes. As the employer, you have the right to ensure your employee uses up their annual leave during their notice period. Working Time Regulations allow employers to specify the dates on which an employee must take some, or all, of their annual leave. But there is a caveat.

Employers can force employees to take holiday during their notice period, but they must give the employee notice. This should be at least double the number of leave days you want the employee to take. For example, if the employee has 4 days of holiday remaining, you must give the employee at least 8 days’ notice.

This is important to remember if your employee has a short notice period. Are there enough days remaining in their notice period for you to give your employee notice of their holiday and for them to take that time off?

What happens if an employee takes more leave than they’ve accrued?

If the employee has taken more leave than they are entitled to in the current holiday year, you can make a deduction from their final pay. This should be equivalent to the additional days of leave they’ve taken.

You must agree this in advance with the employee and put the details in writing. Make sure your employment contract or employee handbook includes these details. This way the employee knows what to expect.

Can I pay an employee in lieu of holiday during their notice period?

Sometimes an employee doesn’t want to use their remaining annual leave entitlement in their notice period, or they're unable to. In this situation you must pay them for the holiday days they've accrued but not taken.

How do I calculate holiday pay for an employee who is leaving?

If your employee chooses to be paid for holiday they haven't taken, you'll need to know how to calculate what you owe them.

Here’s the calculation you need to work this out:

(A x B) - C

• A is the total number of days’ holiday the employee is entitled to in a year
• B is the fraction of the year to the date of leaving (month of the year ÷ 12)
• C is the amount of holiday already taken this year

For example:

Sean works 5 days a week and is entitled to 5.6 weeks’ paid annual leave. (A)

He hands in his notice and leaves in April, 4 months into the year. (B)

He has already taken 9 days of annual leave. This is the equivalent of 1.8 weeks (9 days ÷ 5 working days per week) (C)

By applying the formula above, we get the following sum: 

5.6 weeks x (4 months ÷ 12 months) - 1.8 weeks
= 0.067 weeks’ leave to be paid in lieu.

Important: When the formula gives you a decimal, it’s usually recommended that you round the number up rather than down to avoid underpayment (and an unhappy employee).