Holiday accrual

Holiday accrual is where you earn holiday entitlement based on the number of hours you work. In this type of system, holiday pay entitlement builds up from the moment the employee begins work.
  • Author: Siva
  • Last updated: April 5, 2022
  • 5 Minutes
holiday accrual management from Papershift

Holidays are an essential part of life. But taking holidays from work can be a minefield of regulations and worry.

For an employee, understanding how holidays accrue can be confusing. For an employer, understanding the best way to manage staff leave can be a minefield. And with so many methods for administering holidays, how do you know which one is right for your business?

One of the most popular methods for dealing with leave is the method of holiday accrual. But what is it and how does it work? In this guide, we will answer these questions and so many more. Let’s begin.

What is Holiday Accrual?

Holiday accrual is where you earn holiday entitlement based on the number of hours you work. In this type of system, holiday pay entitlement builds up from the moment the employee begins work. As they continue in employment, they will accrue a proportion of their annual entitlement on a monthly basis. This makes it a perfect system for employees and workplaces that have irregular hours.

Holiday accrual systems are most commonly used in the first year of a worker’s employment with a business. This is because new employees often leave businesses early in their careers while they still have a holiday deficit.

How is Holiday Accrual Administered?

When an employee accrues holiday overtime, employers often give it as a percentage of the full leave entitlement each month. Holiday accumulated each month allows the staff member to build holiday entitlement during their leave year. Their entitlement develops from the first day of each business year or holiday period. Generally, it will accumulate at the pace of one-twelfth of the year’s privilege every month.

For example, an employee who receives 28 days holiday each leave period will accumulate one twelfth of 28 days each month as leave entitlement. This amounts to 28 x 1/12th, which equals 2 and 1/3rd days’ holiday each month.

Another example – a full-time member of staff who has been in employment for six months would have built up 6/12ths (or one half) of their annual entitlement. If their annual allowance is 28 days, the employee would have accrued 28 X 6/12th = 14 days.

How Much Accrual Can an Employee Claim?

Employees can claim a minimum of 5.6 weeks’ worth of holiday accruals each year. This is in line with the statutory holiday regulations set out in the Working Time Regulations 1998.

Can I Accrue More Holiday Than the 5.6 Weeks Set Out in Law?

Yes, you can. Some businesses offer extra leave to staff or grant it as a perk for long service. Either way, this may allow an employee to accrue holiday above the statutory minimum required by law. If this is the case, the employee will accrue holiday at a faster rate than normal. For example, their one twelfth of the years’ privilege may amount to more than those who are on the statutory minimum.

Can My Employer Give Me Less Than the Statutory Minimum?

No, they may not. Employers are legally bound to give all employers a minimum of 5.6 weeks’ holiday each year. If they offer less than this, they are breaking the law.

If a holiday accrual system is in place, then the employer must ensure that the total number of holiday days accrued by the employee are no less than the statutory minimum.

What If an Employee Leaves with An Accrual Deficit?

If an employee who has their full annual entitlement available up-front uses their entire allowance but then ends their employment before the year ends, they may owe the business money. Normally, this would require HR departments to work out how much money the employee owes the company. It may also mean that adjustments have to be made to the employee’s final pay cheque.

What if an Employee Leaves with Holiday Still Owed to Them?

At the end of employment, any holiday that an employee has accrued but has not used will be owed to them. This may mean that a business will have to make an extra monetary payment to the employee to compensate.

Will I Accrue Holiday Whilst on Maternity Leave?

Holiday accrual doesn’t need the employee to be working. As such, it will keep on accruing during times of absence like maternity leave.

Holiday accrual during maternity leave can cause problems for an employer. This is most obvious when an employee’s maternity leave coincides with all or most of a leave accumulation period. This is down to the fact that a person on maternity leave will accrue a full year of leave but have no time to take it when they return. It is impossible to take holiday leave at the same time as maternity leave.

If this happens, the employer should agree with the employee how the leave will be administered. This can include doing one of the following:

  • Ensuring the employee takes their holiday days before they go on maternity leave. This can often be useful for the employee, so they have time to prepare for the baby’s birth.
  • Agreeing to pay the employee for the holiday days they cannot take. Employers are often reluctant to do this as it carries extra expense.
  • Allowing the employee to carry over holiday to the next holiday period. This is more often the preferred method for employers as it keeps costs to a minimum.
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What Are the Alternatives to Holiday Accrual?

The main alternative to holiday accrual is to give the entire leave entitlement up front to employees. This can simplify the process of managing holidays but can leave businesses with financial deficits if an employee leaves before the end of the working year.

Can I Buy Extra Holiday From My Employer?

Some employers allow their staff to buy extra holiday from them. This is not a legal entitlement, however, and each business must decide whether to offer this perk to staff. If they do, then this will alter the way they give holiday entitlement to the employee. For example, an employee will still accrue holiday as normal but the days/weeks they have bought will be available straight away for them to take.

In Conclusion

Holiday accrual can be a complex issue. But with a little help from our guide, we hope you find this tricky subject easier to navigate. Try Papershift’s staff leave planner software to automate and fix this problem.

manage shift planning, timesheet and sta
Free Trial
Track Staff Working Hours, Record Absence & Approve Vacation
  • Clock in and out from browser
  • Time tracking via Phone & Tablet app
  • View & approve time records online
  • Export timesheets to payroll
  • View & approve staff vacation requests
  • Overview of employee availability & absences
14 days free trial. No credit card required
14 days free trial Know more

Photo by Beth Jnr on Unsplash



Written by Siva

I write & describe the value & benefits delivered by Paperhift's rota planning, staff time tracking, and employee payroll management software. Especially useful for Shift Planners, Rota Managers, Team Admins, and HR Teams :-)