Exploring the Pros and Cons of Annual Leave Carryover

The end of the year should be a happy time, full of coziness, warmth and relaxation after a hard year of work. At least that would be the case if employees could book the right days off and there were no arguments about who could take vacation.

In December, many companies notice that many employees do not use their annual vacation. This can lead to a Christmas mess, with the office unnaturally empty in the winter months (and productivity plummeting).

Is carrying over annual leave a good solution to this problem? And can you use it to keep your employees happy without endangering the company? The answer is yes - here are some possible solutions.

Is vacation transfer legal?

Yes she is!

Employees are entitled to 28 days of statutory annual leave per year (5.6 weeks). Of these, 4 weeks must be taken within the year in which they were purchased (this is the EU minimum, which may change if the UK's relationship with Europe changes).

The remaining 1.6 weeks, plus any additional weeks granted by your company, are statutory leave in the UK, which can be carried over to the next year. However, this is at your discretion. You can adopt a "use it or lose it" policy, but this must be documented and communicated appropriately well before the end of the year. If you wish, you can also limit the number of days transferred to less than 8.

For someone who works 5 days a week and is granted those 28 days, this means they are allowed to carry 8 of those days over to the following year unless their company refuses to do so as part of their standard policy.

Reasons for transferring annual leave

Why would anyone want to transfer part of their annual leave entitlement? Well, there are several reasons for this.

Transfer of annual leave due to illness

It may happen that a member of the team needs to carry over their annual leave to the next year due to a long-term illness. The European Court of Justice has ruled that employees are legally entitled to take their annual leave at a different time if it coincides with a period of illness. However, there is no obligation for UK employers to carry over more than four weeks of annual leave for long-term sick leave.

Transfer of annual leave due to parental leave

The law requires women to be able to carry over their annual leave and public holidays received during their maternity leave.

Intended transfer of annual leave

If your annual leave carryover policy is well established, some team members may wish to carry over their leave so that they can plan a particularly long vacation or events such as weddings and honeymoons without having to take unpaid leave.

What are the benefits of a vacation transfer?

It can be a solution to the well-known problem of overbooking at the end of the year.

If everyone is trying to use up their annual leave, carrying over some of the leave into the new year can reduce the demand that creates staff shortages on holidays.

It also gives your company culture a bit of flexibility, which we generally welcome. If you give your employees the opportunity to plan beyond December, they'll appreciate it, especially if they're specifically looking to save up extra vacation days for a big trip next year.

And in general, January and February are fairly quiet vacation times, so there shouldn't be any major staffing issues if people carry over their vacation between now and then. In addition, bargain hunters can get cheaper deals on flights and hotels at the start of the low season.

What happens if you don't allow annual leave to be carried over?

When you reach the end of the year and your employees don't know they can't carry over their vacation, it will lead to difficult decisions and conversations that could have been avoided.

Especially if you don't have a documented absence policy and have made promises without writing them down.

Imagine denying someone a vacation in December and they respond like this:

"You said I had the whole Christmas season off, remember? My parents booked flights to come visit us. We can't cancel now!"

If you already have a staff shortage over Christmas, the only option is to ask another colleague to cancel their holiday and carry it over to next year.

If you go back on your word and just say no, you'll probably find that unplanned absences increase at that time anyway.

So this type of transfer ban requires solid advance planning to avoid these conflicts.

The first step is to establish your transfer arrangements in advance, record them in a simple document, and communicate them throughout the company throughout the year. We've created some simple templates you can use to make this process easier - you can download them here.

How to avoid excessive vacation carryovers

There is a risk that too many employees will save up their vacation throughout the year, putting undue pressure on headcount the following year.

The easiest solution is to encourage employees to take their vacation all year round!

This is beneficial for both your company and your employees. You can plan your resources better without major fluctuations in staffing levels. And the employee can use their pocket money (a benefit that not everyone can take advantage of) and take advantage of some much-needed time off.

This is important because some people tend to overwork themselves to the point of burnout without even realizing it. Others think they should only use their annual leave for big trips abroad - which isn't true, because we all benefit from just staying at home every now and then and doing nothing.

If you have a sensible policy that allows some carryover of leave and encourage your employees to take leave, you should end up with a happy workforce and a stable headcount.

With careful planning and clear policies, annual leave carryover can alleviate year-end staffing challenges and promote employee well-being. Explore templates from IceHrm for seamless implementation.