Annual Leave: Use it or Lose it?

December 13, 2018

For many businesses, 31st December marks the end of the annual leave year, which can lead to problems if people haven’t used up all of their allocation. The simple mantra of ‘use it or lose it’ may feel completely reasonable, but it pays to be a little cautious. 

Check your paperwork 

Firstly, review what you have written in your handbook or annual leave policy and contracts about carrying leave forward. Even if you don’t usually allow this, there are certain situations where you must – for example, if someone is unable to take their annual leave because they are on maternity leave or long-term sickness absence. Remember – the only time you are allowed to pay an employee in lieu of their statutory minimum leave is on termination of employment.

Recent Caselaw

A recent European ruling found that an employee with unused leave did not automatically lose their right to take it, or payment in lieu on termination of employment, at the end of the leave year. The onus was on the employer to ‘diligently’ bring it to the employee’s notice that leave would be lost, and have the evidence to support this. The employer doesn’t have to require the employee to take leave, but they must inform them in good time, and ensure there are opportunities for them to take the leave.

What should you do?

It is good practice to encourage employees to use all of their annual leave. Consider having a system in place to review how much leave employees have left at certain intervals through the year, and reminding them in good time to use it (and documenting that you have done so). Remember too that an employer can require employees to use some of their leave entitlement at specific times, such as if the business is closed between Christmas and New Year.

Calculating Annual Leave

For a brief guide to calculating holiday entitlement, including for part-time workers and those on irregular hours, see our guide at

Please note – the information in this article is provided for general guidance, and is not intended as a substitute for specific legal advice in any particular situation.