4 Work colleagues having a meeting The choice of the holiday year is entirely at the discretion of the employer, allowing for flexibility in alignment with the company’s needs. While this autonomy is advantageous, it can also present challenges as employers grapple with determining the most suitable method for both the company and its employees. The absence of set rules underscores the importance of thoughtful consideration and strategic decision-making in selecting a holiday year structure that best serves the needs of the employer and promotes employee satisfaction. Navigating the intricacies of holiday policies, statutory leave, and various entitlements requires careful attention to legal frameworks and effective management systems to ensure compliance and fair treatment of employees. Below is our guide on how to decide your holiday year.


What is a Holiday Year?

A Holiday Year is the period within which an employee can use their annual leave entitlement. It is a fundamental aspect of any organisation’s human resources strategy, providing a framework for managing time off and ensuring a healthy work-life balance. In fact, a study conducted by the Happiness Index explores this importance of annual leave for employees. Their research found that it helps with:

  • Feelings of safety: If employees don’t feel secure in the workplace, they may trigger their “fight-or-flight response”, hindering their ability to perform at their best.
  • Appreciation: Encouraging your team to utilise their annual leave demonstrates your recognition of their hard work and emphasises the importance of taking a break for their well-being.
  • Connectivity in the workplace: For many individuals, the motivation at work stems from the prospect of enjoying quality time outside of professional commitments. It is crucial to allow employees to disconnect completely during their time away. Reminding employees of the purpose behind their work is likely to have a profound impact on their productivity upon their return.

While each company’s holiday year will vary, holiday entitlement is usually divided into two primary categories:

  • Statutory Annual Leave: This is the minimum annual leave that is mandated by law. It represents the baseline of time off that employees are entitled to, as per legal requirements.
  • Contractual Annual Leave: This category encompasses additional annual leave the employer provides beyond the statutory requirements. It is discretionary and is outlined in the employment contract. Employers have the flexibility to offer contractual leave as a bonus or incentive.


Different types of Holiday Year

Calendar Year

This is when an employer chooses the period January to January for the holiday year.
This structure creates a seamless process for both employees and HR staff, allowing for effective tracking of remaining days throughout the year. This is especially crucial when organisations implement a ‘use it or lose it’ policy or have restrictions on the maximum number of consecutive days off that can be taken.

Fiscal Year

The Fiscal Year also known as the Financial Year runs from April to April and so is another popular choice amongst employers. This method makes it easier to track financial reporting and planning. It is worth considering the timing of Easter when planning annual leave. If Easter occurs early in the year, there might be a surge in staff taking time off. Additionally, the Easter Bank Holidays may result in a reduced workforce. Considering these factors can help in effective workforce management and ensure smooth operations during holiday periods.

Employee Start Date

Opting to initiate each employee’s holiday leave year based on their individual start date with the company can be a beneficial strategy for staggered staff holidays. This approach helps mitigate the rush of end-of-year holiday booking frenzy, providing a more organised and manageable scheduling of employee time off throughout the year. Historically, beginning the holiday year on an employee start date has been unpopular as it can be difficult to manage but HR software is perfect for easily tracking employee’s holidays.

 What is accrued holiday?

Accrued holiday refers to the accumulated amount of paid time off an individual accrues each year. Employers typically calculate this based on an employee’s annual leave entitlement and the duration of their employment with the company. The longer an employee works for the company, the more accrued holiday time they accumulate over time.

Employers often establish their own policies regarding annual leave, incorporating rules such as restrictions during peak times, prohibiting the carryover of unused days to the next holiday year, and providing the option for employees to purchase extra days off. These factors should be carefully considered when designing a holiday policy. Customising policies to suit the specific needs and dynamics of the organisation ensures an effective and fair approach to managing annual leave.


What to consider?

Business Cycle

Consider the busiest times of year for your business to optimise staff and minimise disruptions. By strategically planning for peak periods, you can ensure that you have adequate staffing to meet increased demand, maintain productivity, and deliver excellent service. This consideration should be integrated into your overall workforce management and holiday planning strategy, helping you proactively address potential challenges during busy seasons and maintain operational efficiency.

 Employee Preferences

Using an anonymous survey to gauge the census of your employees, will help with employee satisfaction and retention rates. emPerform makes it easy to collect the organisational data needed for decision-making and to engage a winning workforce. By leveraging such tools, employers can gather valuable insights, address concerns, and implement strategies aimed at fostering a positive work environment and boosting employee morale.

Legal Requirements

Labour laws in your industry may impact your decision. Legal requirements regarding minimum leave entitlements, and other related aspects need to be considered when designing and implementing holiday policies. Ensuring compliance with industry-specific labour laws not only helps avoid legal issues but also demonstrates a commitment to fair and lawful employment practices. Staying informed about relevant regulations ensures that your holiday policies align with legal requirements and industry standards.

Industry Norms

Are there any industry norms that could impact your decision? Researching industry standards is a crucial step in understanding common practices within your sector. This knowledge allows you to align your company’s policies, including holiday benefits, with prevailing norms. By staying up to date with industry practices, you can ensure that your offerings are competitive, contributing to your ability to attract and retain top talent. This proactive approach not only helps you remain in line with industry standards but also positions your company as an employer that values and meets the expectations of employees in your specific field.

Rolling vs Fixed Contact

Choosing between a rolling holiday year, where the entitlement period begins on the employee’s anniversary date, and a fixed calendar year depends on what aligns better with your business needs. Additionally, it is crucial to recognise that calculating holiday entitlement for casual workers differs from the process for full-time employees.


Benefits of a well-structured Holiday Year

  • Employee Satisfaction: Annual leave statistics for the UK found “that over 18 million of the UK’s 29.7 million workers didn’t take the amount of leave they were entitled to in 2022”, with over 1 in 10 (10.5%) saying that “they didn’t take their full annual leave last year because they felt pressure from their management”. A well-structured and considered holiday year allows employees adequate time to plan their time off for a better work-life balance.
  • Retention: Offering a generous and flexible holiday policy not only enhances the overall employee experience but also positions the company as an employer of choice. In competitive job markets, a thoughtful and accommodating approach to holiday benefits can contribute significantly to attracting and retaining skilled and motivated professionals.
  • Productivity: Adequate time off ensures employees return to work re-charged and motivated, which in turn increases levels of productivity.
  • Reduced absenteeism: By offering a fair and flexible holiday year, you can reduce unscheduled absences, contributing to the overall stability of your workforce.


What happens if I don’t set a Holiday Year?

Opting not to set a specific holiday year is indeed an option, but it comes with its own challenges, especially in terms of tracking employee annual leave entitlement. Without a structured system, managing and monitoring leaves can become complex. Utilising HR annual leave software proves beneficial in such situations. It provides a streamlined and efficient way to track and manage employee leave, ensuring accuracy, compliance with policies, and ease of administration for both employers and employees. If you choose not to set a holiday year, your employees will be entitled to either:

  • Holiday year beginning from their employment date.
  • Holiday year beginning on the 1st of October, which is the anniversary of the regulations becoming law, as set out by ACAS.

In conclusion, deciding on your holiday year as an employer is a strategic decision that requires careful consideration of numerous factors. Aligning the holiday year with your business needs, industry standards, and the preference of your workforce allows for the creation of a policy that not only enhances employee satisfaction but also contributes to increased productivity and overall organisational success. Recognising the connection between employee well-being, satisfaction, and productivity underscores the importance of a carefully crafted holiday policy in fostering a motivated and loyal workforce.

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