Annual Leave – Use It Or Lose It?

Can I carry annual leave over?

If an employee or worker does not take their holiday entitlement during a working year should they (or their employer) assume that the holiday entitlement has been lost?

What is the Employer’s Policy?

Many employers operate the “Use It or Lose It” policy. This would tend to have the effect that if an employee or worker reaches the end of their holiday year and has not taken their entitlement, they will lose it and will not be able to carry it forward into the next holiday year.

Employment contracts are all different and should state the Employer’s Policy on using holiday entitlement.  Common options are:

• A certain level of holiday entitlement can be carried forward without specific permission.
• Holidays can only be carried forward with specific permission.
• Holiday entitlement cannot be carried forward at all.

Where is the law on this found?

The employment law position on these matters is slightly complicated. The starting point is to consider what the parties to the employment contract have agreed in that contract, and in some situations what they are deemed to have agreed through their ongoing actions. This will often be viewed as meaning that an employer’s “use it or lose it” rule can be enforced.

However, employees’ and workers’ holiday entitlements derive both from employment contracts and from statutory employment law.

Statutory employment law on holiday leave and pay entitlement comes from the Working Time Regulations, which must in turn meet the minimum requirements set down by the European Union’s Working Time Directive. As a result, the interpretation of the Working Time Directive by the Court of Justice of the European Union (CJEU) has a direct impact on the employment law rights of employees and workers in the United Kingdom in this and other areas of employment law.

What does the law say?

Under the Working Time Regulations, it has been clear for some time that the Employment Tribunals and the Courts will find that holiday entitlement will carry forward by law (at least for a reasonable period) in the event that the employee or worker is unable to take those holidays due to maternity leave, sick leave, or due to an employer who refuses to allow, or makes it impossible for the leave to be taken. This would be the case regardless of what the employer’s employment contracts provide.

Can you get paid for unused holidays?

The question of being paid for unused holidays is slightly different from that of being able to carry the holiday entitlement forward. In general terms, an employee cannot insist on being paid for unused holidays while the employment is ongoing, although of course, it may be possible to agree to this with the employer if both parties wish to do so.

However, an employee can insist on being paid for unused holidays at the end of the employment, and this is where the employment law rules on carrying forward holiday entitlement becomes important. The amount of holiday pay that can be claimed at the end of the employment will depend upon factors such as why holidays were not used in a previous holiday year, how long ago that holiday year was, and whether the employer has thought to insist on holidays being used up in a notice period, for example. This is a very interesting area of employment law, and each case can turn on its own facts.