Annual Leave: Laws, Types, and Scenarios

This article will discuss everything you need to know about annual leave, including how to use it and how to get the most out of it.

What is annual leave?

Annual leave is the paid time off your employees take to rest, reset, and stay healthy over the year.

Annual leave vs vacation vs PTO – key concepts

In many countries, annual leave is a legal right 👉 a minimum number of paid days off each year, often called holiday entitlement (UK, EU) or paid annual leave. In US and some other markets, people more often say vacation days or talk about a PTO policy (paid time off), but the idea is similar: paid time away from work.

A PTO bank usually bundles different types of time off (holiday, personal days, sometimes sick leave) into one pot, which employees use as they wish. Some companies experiment with unlimited PTO, but research and HR commentary now show that employees often take no more or even less time off under these schemes if the culture isn’t supportive.

Legally, the UK and EU treat annual leave as a health and safety protection, not a perk: for example, EU working time rules require at least 4 weeks of paid annual leave for every worker, pro-rated for part-time staff.

Legal minimums in key markets

Let's look at a quick benchmark of statutory annual leave so you can sense-check your current policy.

In the UK, almost all workers are entitled to at least 5.6 weeks’ paid annual leave a year. For someone working five days a week, that’s 28 days, and employers can choose whether bank holidays are included in those 28 days or on top. Part-time workers get the same 5.6 weeks pro-rated (for example, 3 days a week = 16.8 days).

From 1 April 2024, new rules clarified how to handle irregular-hours and part-year workers. For leave years starting on or after that date, they can accrue statutory leave based on 12.07% of hours worked, up to the same 5.6-week maximum. Employers can also use rolled-up holiday pay for these workers, provided it is paid at the normal rate and clearly shown on payslips.
In the United States, there is no federal law that guarantees paid annual leave or vacation time. Instead, paid vacation and PTO are contractual benefits set by each employer, sometimes influenced by state law on issues like “use-it-or-lose-it” and payout of unused vacation at termination. That means your vacation policy or PTO policy is the main protection employees have.

In practice, most full-time workers do get paid vacation. Bureau of Labor Statistics data for March 2025 show that between around one-third and over 90% of workers have access to paid vacation, depending on establishment size, with coverage highest in larger employers.

Typical allowances for full-time staff start around 10 working days after one year of service and rise with tenure, often combined with paid holidays and sick leave in a single PTO bank.

📊Comparison table – Statutory annual leave highlights: UK vs US vs EU:

Region	Legal minimum paid annual leave	Typical employer practice (full-time)	2025 compliance highlight
UK	5.6 weeks (28 days for 5-day week), pro-rated for part-time Gov.uk, 2025	Many employers offer 25–30+ days including bank holidays, sometimes more with service	New 2024 rules for irregular-hours/part-year workers: 12.07% accrual and optional rolled-up pay
US (federal)	No statutory minimum for paid vacation or PTO	Commonly 10–20 paid days plus public holidays, often via a PTO bank; entitlement rises with tenure	State laws may restrict “use-it-or-lose-it” and regulate payout of unused vacation on termination
EU (Directive)	At least 4 weeks’ paid annual leave, pro-rated for part-time	Many countries go beyond 4 weeks, especially when adding public holidays and contractual leave	National law builds on the Directive; employers must track working time and leave accurately

How annual leave accrues and is calculated

This section gives you simple formulas so you can sanity-check your holiday balances.

Fixed hours and pro-rata for part-time staff

For regular hours in the UK, the statutory minimum is 5.6 weeks per year. You can turn that into days with a very simple formula:

Formula (days):

Annual leave (days) = Days worked per week × 5.6

If you prefer to work in hours (useful for shifts of different lengths):

Formula (hours):

Annual leave (hours) = Weekly contracted hours × 5.6

So if someone works 37.5 hours per week on a standard 5-day pattern:

37.5 × 5.6 = 210 hours of statutory leave.

Examples of statutory minimum leave for fixed days per week :

Days worked per week	Statutory minimum days of leave (5.6 weeks)
5	28
4	22.4
3	16.8
2	11.2

Irregular-hours and part-year workers (UK 12.07% method)

From leave years starting on or after 1 April 2024, UK law allows a simple percentage for holiday for irregular-hours and part-year workers. Core idea: they build up paid leave based on a percentage of the hours they actually work.

Formula (accrual per pay period):

Holiday hours accrued = Hours worked in the period × 12.07%

Example:

Worker does 80 hours in a month.
Holiday = 80 × 0.1207 ≈ 9.66 hours of paid leave.

The 12.07% rate is set in the Employment Rights (Amendment…) Regulations 2023 to match 5.6 weeks’ leave over a full year of work. The government also allows rolled-up holiday pay for these workers if it is clearly shown on payslips and paid at the correct “normal pay” rate.

Accrual during probation, sickness and family leave

Annual leave normally starts accruing from day one, even during the probation period. In the UK and EU, employees also keep accruing statutory holiday while on sickness absence and on statutory family leave (for example maternity or shared parental leave). If they cannot use this leave in the current holiday year, they often have the right to carry it over to a later period, within limits.

Pro-rata on joiners and leavers (quick method)

For mid-year starters and leavers, the basic UK method is:

Work out the full-year entitlement for the role.
Work out the fraction of the holiday year the person will be employed.
Multiply full-year entitlement by that fraction, then round in line with your policy/local law.

👉 Example: holiday year 1 Jan–31 Dec, entitlement 28 days, employee joins on 1 July. They work half the year, so they get roughly 14 days (28 × 6/12).

Managing annual leave in real life (coverage, fairness, and culture)

Here we focus on the day-to-day juggling act: who can be off, when, and how to keep it fair.

Setting clear notice periods, approval rules, and blackout dates

Your annual leave or PTO policy should answer three questions fast: how to book, how early, and how decisions are made. CIPD recommends clear written rules on notice periods, how conflicts are resolved, and how carry-over works to avoid inconsistency and discrimination claims.

✅ Micro-checklist: what your policy should cover

Minimum notice to book leave.
Who approves requests (and backups).
How you decide when too many people are off.
Any blackout dates or shutdown periods.
Rules on carry-over and expiry (“use it or lose it”).

Avoiding bottlenecks: rota planning for peak seasons

Most problems happen when everyone wants the same weeks off. For seasonal sectors like retail, hospitality and healthcare, map out peak periods and set hard limits on how many people in each role can be away at once. Guidance for UK employers stresses using transparent rules (rotation, first-come-first-served, or priority for parents at certain times) to avoid complaints and keep cover safe.

You can also steer people towards off-peak holidays by encouraging early planning and showing which weeks are already busy. That cuts last-minute refusals, overtime spikes and burnout for the people left on rota.

Encouraging employees to actually take leave (with usage data)

Recent UK data shows employees are not using all their annual leave. One large analysis found an almost 8% drop in days taken between 2022 and 2023, with many workers leaving holiday on the table.

Timetastic’s 2024 statistics also show that a significant share of workers end each year with unused allowance, often due to workload pressure or a “always on” culture.

Practical ideas for managers:

Ask about holiday plans in one-to-ones and team meetings.
Monitor who is hoarding leave and give early nudges.
Model good behaviour yourself: take your own leave and avoid emailing when you’re off.

💡Shiftbase gives you a live calendar and balance view per team, so you can see who is off, who rarely takes leave, and which weeks are overloaded. You can approve requests, manage national holidays and spot leave bottlenecks in one place instead of chasing emails.

How Shiftbase helps you manage annual leave without losing your mind

Shiftbase gives you one place to manage holiday balances, absence types, policies and contracts, instead of scattered spreadsheets. Each employee has a clear absence overview with their current balance, carried-over days, and approved or pending requests, so you can see at a glance who has what left.

You can configure accrual factors (for example, days or hours per year), define statutory vs extra-contractual leave, and use “time off balance corrections” to tidy legacy errors or imports. Employees can also check their own balances via the My absence page and mobile app, which reduces “How much holiday do I have left?” messages.

3-step setup for clean balances in Shiftbase

Define your absence policies (statutory, additional, PTO types).
Link policies and accrual factors to each contract.
Import or correct opening balances, and let Shiftbase handle the rest.

👉 If you want to move from “firefighting holiday requests” to data-driven leave management, you can try Shiftbase free for 14 days and test absence policies, approvals and reporting with your own team

Manage leave and absence with ease!

Automatic accrual of vacation hours
Request leave easily
Leave registrations visible in the planning

Try for free Request a demo

Frequently Asked Questions

Yes, you can refuse an annual leave request if there is a genuine business reason and you follow the correct notice rules.

In the UK, an employer can refuse a request or cancel leave, but must give at least as much notice as the amount of leave requested, plus 1 day (unless the contract sets a different rule).

For example, if someone asks for 5 days, you should give at least 6 days’ notice to say no. You cannot refuse leave in a way that stops workers taking their statutory 5.6 weeks at all.

💡Manager tip: write down your approval rules (first-come-first-served, rotation, skills cover) and apply them consistently to avoid discrimination complaints.
You can cancel already-approved leave, but it should be rare and a last resort.

In the UK, the same notice rule applies: you must give at least as much notice as the leave being cancelled, plus 1 day, unless the contract says otherwise. You should only cancel for serious operational reasons, and you may need to reimburse non-refundable costs (for example, flights) if the cancellation causes the employee financial loss.

⚠️ If you cancel holidays repeatedly, you risk damaging trust and potentially contributing to constructive dismissal or stress-related claims.
If an employee becomes genuinely ill while on holiday, UK law allows them to switch those days from annual leave to sick leave, provided they tell you and follow your sickness reporting rules.

You should then let them rebook their lost holiday later, and if they cannot fit it into the same leave year, some of it can be carried over. Clear evidence rules (for example, needing a fit note after a set number of days) should be written into your policy and applied consistently.
In the UK, when employment ends you must pay an employee for any accrued but untaken statutory holiday – this is holiday pay “in lieu”.

You can also, if the contract allows, deduct pay if someone has taken more leave than they had built up by their leaving date, as long as this does not push pay below minimum wage for work already done. The safest approach is to calculate entitlement pro-rata to the termination date and show the working in the final pay slip or letter.

In other countries (for example, US states or EU members), payout rules differ, so always check local law or local HR advice.
For employees who live and work in another country, you usually need to follow the employment law of the country where they habitually work, including local holiday rules.

Cross-border remote work brings extra risk around tax, social security and which country’s labour laws apply; many legal guides now warn that you cannot “contract out” of local protections such as minimum leave or public holidays.

The safest route is to agree in writing which country’s calendar and public holidays apply, then get local legal advice to confirm you are compliant

Annual Leave Explained: Laws, Types, and Scenarios