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Holiday accrual systems explained

If there's one area of holiday management that gives HR professionals a headache, it's the accrual system - particularly when it crosses over with other forms of leave, such as sick leave or parental leave.

The Working Time Regulations allow employers to use an accrual system to work out how much holiday leave a worker has built up during their first year of employment. During this time, an employer can choose to give a worker only as much holiday as he or she has built up to date.

Statutory holiday entitlement starts to build up - or accrue - from the first day of employment. It accrues monthly in proportion to the annual entitlement. In other words, a full-time worker in the ninth month of employment would have built up 9/12ths (or three-quarters) of annual entitlement. The statutory annual entitlement for the typical five-days-a-week job is 28 days, so in this case the worker would have accrued 28 x 9/12 = 21 days.

When employees are on sick leave during this period, they continue to accrue holiday at the normal rate. And if the employee can't take this leave during their first year because of sickness absence, then the employer must let all or some of it be carried over to the next year. As a minimum, the employer must ensure that the employee has been able to take or carry over four weeks' holiday a year.

What about maternity leave? Again, the employee continues to accrue statutory minimum holiday and any additional contractual holiday entitlement. The holiday can't be used during maternity leave, though arrangements could be made to add the leave on to the beginning or end of the maternity leave period. The same goes for paternity leave.

At the end of employment, employees are entitled to a payment for any unused holiday that has been accrued. Conversely, a contract of employment could make a provision that workers terminating their employment repay the employer for any leave taken beyond the amount that has been accrued.

In the second year of employment, workers are entitled to all their leave as soon as the new holiday year starts. Employers may choose when the leave is taken and for how long - for example, a two-week shutdown around Christmas and New Year.

Acas has published the Advice leaflet - Holidays and holiday pay and has a wealth of detailed information on the ins and outs of the Working hours and Holidays. Acas also runs practical training courses on Holidays, including how to manage, calculate and approve holidays and holiday pay.

Visit the Acas Training and Business Solutions page for more information.

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