Holiday accrual is the process by which employees build up their entitlement to paid annual leave over time, rather than receiving it all at the start of the leave year.
What is holiday accrual?
Holiday accrual is the way employees accumulate paid leave as they work. Instead of being granted a full year's allowance upfront, entitlement builds up gradually (usually on a monthly or per-pay-period basis) until the employee has earned their full annual leave allowance for the year. In the UK, the statutory minimum is 5.6 weeks of paid holiday per year (28 days for a full-time employee working a five-day week), which includes bank holidays.
How does holiday accrual work?
For most employees on regular hours, holiday entitlement accrues across the leave year. The most practical way to think about it: a full-time employee entitled to 28 days per year accrues roughly one twelfth of that entitlement each month they work; about 2.33 days per month.
Monthly accrual example (full-time employee): 28 days ÷ 12 months = 2.33 days accrued per month
For a part-time employee working three days a week, the same logic applies on a pro-rata basis: 3 days ÷ 5 days × 28 days = 16.8 days annual entitlement 16.8 ÷ 12 = 1.4 days accrued per month
The 12.07% method for irregular hours and part-year workers
For employees who work irregular hours or only part of the year (such as seasonal or term-time workers), a different accrual method applies for leave years beginning on or after 1 April 2024.
Under rules introduced by the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023, holiday entitlement for these workers is calculated as 12.07% of actual hours worked in each pay period.
Where does 12.07% come from? 5.6 weeks of statutory leave ÷ 46.4 working weeks in the year = 12.07%
- Worked example: An irregular-hours worker works 68 hours in June. 68 × 12.07% = 8.2 hours of holiday accrued in that pay period. (Hours are rounded to the nearest hour up if 30 minutes or more, down if less.)
This method applies to irregular hours workers and part-year workers only. Employees on fixed regular contracts continue to accrue leave across the leave year as described above.
What is pro-rata holiday entitlement?
Pro-rata holiday entitlement applies when an employee works fewer hours than a full-time equivalent, or joins or leaves part way through the leave year. Their entitlement is scaled proportionally to reflect the actual time they work.
- Part-time example: An employee works 20 hours a week against a full-time week of 40 hours. 20 ÷ 40 × 28 days = 14 days' annual leave entitlement
- New starter mid-year example: An employee starts work on 1 July. They have half a leave year remaining. 28 days × 0.5 = 14 days' entitlement for that leave year
Pro-rata calculations apply during the first year of employment, when an employee leaves during the leave year, or when an employee moves from full-time to part-time (or vice versa) during the year.
Holiday accrual during sick leave and statutory leave
Employees continue to accrue holiday entitlement while on sick leave, maternity leave, paternity leave, adoption leave, and other forms of statutory leave. Tracking and managing your overall absence rate across the organisation is essential for understanding the impact of this entitlement on staffing and costs. This right is protected under the Working Time Regulations and was codified into UK law from 1 January 2024.
Key rules:
- Employees on sick leave or family-related statutory leave accrue their full 5.6 weeks of statutory holiday entitlement during the absence.
- If an employee is unable to take their accrued holiday during the leave year because of illness or statutory leave, they are entitled to carry it over (see below).
- For irregular hours and part-year workers on sick leave or statutory leave from leave years beginning 1 April 2024, holiday is calculated using a 52-week reference period to determine average hours worked.
Employers should ensure that employees returning from long-term sick leave or maternity leave are given a reasonable opportunity to use their carried-over entitlement before it lapses.
Holiday carry-over rules
By default, statutory holiday entitlement cannot be carried over from one leave year to the next; employees are expected to take their full allowance within the leave year. However, following changes that came into effect on 1 January 2024, there are now codified statutory rights to carry over unused annual leave in the UK in specific circumstances.
Employees can carry over holiday when:
| Reason for carry-over | How much can be carried over | Time limit |
|---|---|---|
| Could not take leave due to sick leave | Up to 4 weeks (EU-derived entitlement) | Must be used within 18 months of the end of the leave year in which it accrued |
| Could not take leave due to maternity, paternity, adoption, or other statutory leave | Full 5.6 weeks | Into the following leave year |
| Employer failed to give reasonable opportunity to take leave, or failed to inform the employee leave would be lapsed | Up to 4 weeks | Carries over indefinitely until used |
What happens to accrued holiday when an employee leaves?
When an employee leaves their job, they are entitled to be paid for any holiday they have accrued but not yet taken in the current leave year. Understanding how to calculate vacation pay for hourly employees helps ensure this payment, known as pay in lieu of accrued holiday, is accurate and compliant.
- How it's calculated: The amount owed is based on the number of days accrued up to the leaving date, minus any days already taken. Holiday pay is calculated using the employee's average weekly pay over the previous 52 paid weeks, not just their basic salary. This means it should include regular overtime, commission, and similar payments where applicable.
- Accrual deficit on leaving: If an employee has taken more holiday than they have accrued by their leaving date, the employer may (if the employment contract allows it) deduct the excess from the final pay. This should be set out clearly in the contract before it happens.
Managing holiday accrual
Keeping holiday accrual accurate across a team is straightforward in principle but easy to lose track of in practice, especially for businesses with shift workers, variable hours, or high turnover, which is where dedicated vacation scheduling software with custom accrual rules can help.
The most common failure points:
- Balances not updated after approvals: an employee takes leave, but the spreadsheet doesn't get updated until payday, often because there is no structured process for fairly managing time off requests
- Pro-rata errors for new starters or leavers: entitlement calculated on the full year instead of the actual period worked, often due to unclear rules in the employee attendance and time-off policy
- Irregular hours workers calculated incorrectly: using a flat annual entitlement instead of the 12.07% method now required for these workers, something that robust time and attendance software can help prevent
- Leave accrual during sick leave overlooked: employees on long-term absence continue to accrue and this is often missed
Managing holiday accrual in a shift-based business
For teams with variable hours, shift patterns, and high turnover, keeping leave balances accurate manually is where errors creep in. Moving to online shift planning and integrating it with absence management means balances update automatically when leave is approved, carry-over rules are handled by the system, and gaps from sick calls are visible the moment they happen. Shiftbase connects absence management directly to the schedule; balances update automatically when leave is approved, carry-over rules are handled by the system, and gaps from sick calls are visible the moment they happen. See how absence management works →
