Paid Holidays and How They Work

Author: Eugenija Steponkute
Published: 28/05/2024

The focus of this article is the ins and outs of the paid holiday. While everyone is familiar with the concept, there are sides that aren’t spoken of often. We aim to either educate you or remind you of them.

Holiday entitlement is a government regulation that requires an employer to provide their staff with a minimum of 28 days of paid time off. It is a simple concept everyone is familiar with. However, given there is a variety of working conditions, payment nuances, employment types and other factors, the process isn’t as straightforward. And sometimes companies spend too much money and resources in trying to sort their holiday policies out when the only thing they lack is basic understanding. 

There is an easy solution to that, which we will be exploring in this blog article. Namely, it all trickles down to understanding the basics and then some more intricate aspects. Both will be covered below, together with recommendations of what tools could potentially help you optimise these processes too.

How to Calculate Holiday Entitlement? 

Holiday entitlement calculations follow a simple formula. The number of days of paid annual leave is calculated by days worked a week × 5.6. For a more granular approach, especially when dealing with temporary hour workers, use accrued hours × employee's hourly rate.

However, if you are based in the UK, there is an official calculator available. It covers both irregular hours and full-time employment, as well as various other conditions such as the employee not working the full year, etc. You can find it here.

The Basics

We won’t bother with defining what minimal holiday entitlement is as we’ve covered this topic in the past. However, we will be looking into slightly more in-depth basic bits of it that tend to raise questions and are sometimes seen as controversial. Keep in mind that they are not applicable to every business. 

Does Holiday Entitlement Cover Bank Holidays?

The short answer is yes. The full version would be that it depends on the business. To keep it simple, there are plenty of businesses that are still operational over the bank holidays. Normally, bank holidays are not considered as part of the holiday entitlement. However, in companies to whom bank holidays might be particularly profitable, such as the hospitality sector, they fall into the brackets of holiday entitlement as they must be booked off in advance. 

This is a controversial topic as it suggests holiday entitlement isn’t the same depending on the sector. We disagree. First of all, only the minimum holiday entitlement is preset by law - there is no cap for companies willing to offer more paid time off. Businesses operating on bank holidays can even this out by giving their employees a longer annual leave. Additionally, industries that continue with the service or are even more swarmed during the bank holiday could be offering an alternative day off company-wide once the busy time is over. Ultimately, the fairness in this case is up to the employer, not the system. 

Holiday Accruals and Carryovers

In theory, there is nothing difficult about accruals or carryovers. If your staff don’t claim all of their annual leave, it’s called a holiday accrual. And it then carries over to the next year. As simple as this may sound, the practice isn’t always as linear. First of all, different companies usually have different carryover rules. For example, there may be a limited number of days a single employee may carry over from one calendar year to another. 

Accruals are even more complicated as there are more conditions to affect them. Namely the basis on which an individual employee is working. Their pay frequency (hourly rate vs salary), status (part-time vs full-time) and longevity with the company (temporary vs permanent) will all affect how the holiday is accrued. And it can get very complicated when a couple of special conditions come into play. To save yourself time and money, as well as reduce potential errors in calculations, we highly recommend getting a holiday management tool that will handle these operations for you.

Things Worth Knowing

Having covered the basic grounds, there are more intricate tidbits. They aren’t as essential, but are handy to know especially if you’re trying to better optimise your business in terms of holiday management and work distribution.

Enforcing Time Off

Not only can you force your staff to take time off, but it’s a practice more companies should embrace. As long as there’s a process in place, this is a very effective way to curb the workaholism epidemic the world is dealing with. An over-glorified view of productivity and consistently excelling performance makes many workers skip out on taking time off, which is the quickest route to eventual burnout. It is as harmful to your business as it is to them as it affects both their performance and the office culture. 

As long as there is a defined process to it, that is. Same as when an employee requests an annual leave, it should be enforced with a relevant notice. Usually, the optimal number of days is suggested to be that of how many days off they are urged to take. It also shouldn’t be treated as a way to punish your workers as it would become a paid suspension, which is never good for morale. Instead, approach your workers from a place of empathy and communicate to them this is a way to help them maintain their wellbeing.

Remaining Mindful of Availability

While it’s important to have a healthy approach to holidays, you also should not be sacrificing your company’s productivity. Namely, you still need to watch your staff availability before granting holiday requests to ensure you don’t find yourself shorthanded, especially during busy periods. A centralised holiday management system is the perfect solution for it. Most platforms provide a calendar view for a few months in advance, showing each worker’s availability.

Depending on the tool and whether you’re an approver or have someone else designated for the task, you may set up warnings when accepting someone’s holiday request on the day there are already a couple of workers off. It is also highly beneficial for companies utilising hourly workers or temporary staff to have a holiday management tool connected to their timesheet solution. Not only it keeps them in the loop in terms of availability that isn’t always consistent but also takes over tasks like holiday accrual calculations. 

Get Better at Holiday Management

If it seems there are many things to cover to become truly efficient in holiday management - you’re right. But the good news is that there’s a way to do it fast and with little to no effort. All you need is the right tool.

Introducing a Holiday Management Platform

The easiest way to get the upper hand when dealing with the holiday is to invest in a designated tool. We’ve already spoken about the benefits of a centralised view, but that’s just one of the things holiday management software has to offer. Most platforms offer a variety of features that will help you with a range of holiday-related flows. Such as bookings, approvals, accrual calculations and many more.

Your employees are likely to be very receptive to it too as it is bound to make the process of booking time off easier. Instead of email threads that tend to get lost or forgotten, booking a holiday through the system is a much quicker and smoother operation, only involving but a couple of clicks. It is as equally as easy for the approvers, who can make their decision straight from their email once a request notification comes through. A centralised view also makes it easy to spot gaps and repeating patches in attendance, making absenteeism easier to spot and address before it festers. 


There is a little more to paid holidays than we think upon having them mentioned. While the holiday entitlement is an easy concept to grasp, some factors tend to raise questions. For example, what falls under the umbrella of paid time off? Additionally, how do you calculate holiday accruals and carryovers when dealing with different employment models like zero-hour contracts or contractors? All these procedures can be confusing and human-error-prone, especially when one lacks understanding or experience. 

Many companies also struggle to understand time off can be enforced when employees don’t claim their holiday entitlement voluntarily. As long as there’s a clear procedure in place, it’s a regular business process you shouldn’t shy away from. And while a healthy approach to granting holidays to your staff should be important, it shouldn’t have a negative impact on your team’s performance. All the concerns relating to time off, compliance and balance can be easily solved with just one tool - a holiday management system.

If you want to try it before committing or have any questions, we are happy to guide you further.

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