How do you deal with unused holiday – use it or lose it?

Feb 7, 2022 | Blog, Legal Updates

If you have a use it or lose it approach then a recent court case might be of interest.

Essentially someone who argued that he was a worked and not a contractor then also claimed he was entitled to holiday pay for 6 yrs. The judge agreed that in his circumstances he was correct.

So what does all that mean?

It essentially means that your “use it or lose it” approach to holiday entitlement, that is, holiday cannot be carried over and must be taken in the holiday year it’s accrued is only going to be considered a valid approach if:

  1. You specifically give them the opportunity to take the leave;
  2. you encourage them to take the leave;
  3. you inform them clearly that the right to holiday will be lost at the end of the holiday year.

If you can’t prove that you’ve taken those steps then the employee will be able to carry over the holiday which will accumulate until their contract comes to an end and they’ll be entitled to be paid for the untaken leave.

What to do now?

Depending on where you are in your holiday leave year, I’d suggest that you:

  • make sure it’s clear to all staff that holiday must be taken in the year it’s been accrued – is it in your handbook and/or holiday policy? If not, consider sending a memo about holidays to every member of the team to clarify your position;
  • make sure that people can access their own holiday records (using an online HR admin system is ideal for this – ask me for details of the one I rate and recommend);
  • send reminders to people about how much holiday they have left and encourage them to get holidays booked;
  • if close to your holiday year end, you should contact any employee with holiday entitlement remaining to ensure that they get their holiday booked before holiday year end,

Or, if you’re a retained client of Keeping HR Simple, we can sort this for you 😊

In short, a “use it or lose it” approach is fine but you need to make sure you communicate that accordingly and not only let people know what holiday they have but encourage them to take it.


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