An annual leave policy is the written set of rules that says how much paid holiday your team gets, how they book it, and how it's tracked across the year. To write one that stands up in the UK, start from the statutory minimum (5.6 weeks, or 28 days for a full-time, five-day week) then add your own rules on bank holidays, carry-over and notice.
Some businesses call this a "PTO policy", that's the American term. In the UK, it's an annual leave or holiday policy, and it has to work within the annual leave rules set by the Working Time Regulations 1998. This guide walks through the law, the decisions you need to make, and a template you can adapt today.
Why does your business need an annual leave policy?
A clear policy does two jobs at once. It keeps you compliant; staff know their entitlement, and you have a consistent way to handle requests, refusals and carry-over. And it removes friction: people can plan time off with confidence, managers approve without guesswork, and nobody is arguing about holiday balances at the end of the year.
For shift-based teams it matters more, not less. When holiday isn't tracked properly, you find out someone's off after you've built the rota, and you're scrambling to fill the gap.
How much annual leave do UK workers get?
Almost everyone classed as a worker is legally entitled to 5.6 weeks of paid holiday a year. For a full-time, five-day week, that's 28 days.
A few rules that catch employers out:
- It's capped at 28 days. Someone working six days a week still gets 28, not 33.6.
- Part-time is pro rata. A three-day-a-week worker gets 16.8 days (3 × 5.6).
- It starts on day one. There's no qualifying period, and it covers agency and zero-hours workers, not just permanent employees.
- You can offer more, but never less. Anything above 28 days is contractual, and you can set your own rules around the extra.
Do bank holidays count as annual leave?
They can, and this is the single most common source of holiday disputes. There's no automatic legal right to take bank holidays off in the UK. The employment contract decides whether a worker takes bank holidays off, and an employer can include the eight bank holidays within the 5.6-week entitlement.
So the wording in your policy is everything:
- "28 days including bank holidays" means 20 days to book freely, plus the 8 bank holidays.
- "20 days plus bank holidays" means 28 days total, the same statutory minimum, framed differently.
- "25 days plus bank holidays" (33 total) is above the minimum and a common way to make an offer more attractive.
State which one you mean. Vague wording here is what ends up in front of an employment tribunal.
How does annual leave work for shift, zero-hours and part-year workers?
If your team's hours change week to week, the day-based calculation doesn't fit. For leave years starting on or after 1 April 2024, irregular-hours and part-year workers accrue statutory holiday at 12.07% of the hours they work in each pay period, capped at 28 days.
In practice: someone works 100 hours in a month, they accrue 12.07 hours of paid holiday. You can also pay rolled-up holiday pay (the 12.07% added to each payslip) which is now permitted for these workers specifically.
The catch is tracking it. Calculating 12.07% by hand across a rota of variable shifts, every pay period, is exactly where policies break down.
Shiftbase absence management works this out automatically; every worker's balance accrues from their actual hours and shows against the live schedule, so you're never approving leave you can't cover.
Can employees carry over unused annual leave?
Usually the statutory leave should be taken within the leave year, but there are firm exceptions:
- Long-term sickness: a worker can carry over up to 4 weeks of holiday, which must usually be used within 18 months of the end of the leave year it accrued in. Calamari
- Maternity, paternity, adoption or shared parental leave: accrued holiday they couldn't take carries over.
- The 1.6-week top-up can be carried over by agreement, up to a maximum of 8 days where a worker gets 28 days' leave. Calamari
- If you prevented someone taking leave (for example, by refusing requests), they can carry it over, potentially without limit.
Your policy should state your carry-over rule clearly, and "use it or lose it" only works if you actively remind people to book their holiday.
How to write your annual leave policy, step by step
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Set the entitlement and the leave year. State the total days, whether bank holidays are included, and when your leave year runs (most use 1 January–31 December or the financial year).
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Spell out bank holidays. "Included" or "on top"? Pro-rate them fairly for part-time staff.
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Define the request and approval process. How much notice, who approves, and how you'll handle clashes during busy periods. You can refuse a request for a genuine business reason, but you must give notice at least as long as the leave requested.
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Set carry-over and accrual rules. Cover the points above, plus how holiday accrues for new starters (one-twelfth of the annual entitlement per month in the first year) and what happens to untaken leave when someone leaves (paid in lieu).
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Cover how leave interacts with other absence. Link it to your sickness absence policy so it's clear what happens when someone falls ill during booked holiday.
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Keep records and review annually. With the Fair Work Agency now able to enforce holiday-pay rules, accurate records are no longer optional. Review the policy once a year against current law and your own staffing reality.
Annual leave policy template
Manage your annual leave policy in Shiftbase
A policy is only as good as the system behind it. Shiftbase keeps holiday entitlement, requests and accrual in one place, connected to the rota, so approved leave updates the schedule instantly and gaps are visible before they become a problem.
- Absence management: balances, requests and approvals, with accrual handled automatically (including 12.07% for irregular hours).
- Employee scheduling: see who's off before you build the rota.
- Time tracking: accurate hours feeding clean payroll.
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- Automatic accrual of vacation hours
- Request leave easily
- Leave registrations visible in the planning
