The legal implications of unclaimed holiday

It's great to see that more and more employers are recognising the importance of giving their staff time to recharge away from work.

But here's the surprising—and somewhat concerning—part: many employees still aren't using all of their annual leave.

So, what's going on? Let's dive into why this happens and explore what employers can do to encourage their teams to take the time off they’ve earned.

Why are employees not using their annual leave?

The recent holiday study by Breathe has revealed there are several reasons why people aren't using their leave:

• Being worried that taking their annual leave would reflect badly on their performance

• Staff shortages 

• A desire to 'reclaim' or sell back their annual leave 

• Having more responsibility in their role and being too busy 

• Employers not encouraging time off

What are the risks of annual leave not being taken?

The legal side 

When it comes to annual leave, employers should keep in mind that the statutory minimum isn't just a legal box tick - it's also about health and safety. The idea behind this requirement is to ensure that employees get the necessary 'downtime' to rest, recharge, and stay healthy. Ignoring this can lead to more than just tired staff; it could put employers at risk of violating the Working Time Regulations if employees don’t take their statutory minimum leave within the holiday year. 

Also, if not taking annual leave results in burnout, or worse, leads to depression or a breakdown, it could be that the employee is classed as disabled under the Equality Act 2010. This could open the door to discrimination claims, and possibly even personal injury claims, if the employer hasn't taken the steps to support their staff. 

Management 

When employees feel they can't take their annual leave, it often leads to more than just legal problems for companies—it also impacts the overall health of the workplace. Employees who don't get the time off they need are unlikely to stay motivated and engaged, which, over time, can breed disengagement and resentment. This often results in a decline in performance and higher staff turnover.

As a result, companies may find themselves dealing with more performance management issues, increased short-term and long-term sickness absences, and a rise in turnover.

The costs are significant - short-term absences alone cost employers an estimated £14 billion each year, while long-term absences add up to about £37.2 billion in lost productivity. These problems often sneak up on employers who aren't keeping a close eye on their team's wellbeing. If a team is hitting its targets, possibly because no one is taking their leave and productivity seems high, it can be easy to miss the signs of burnout until it’s too late.

4 ways employers can ensure employees use their annual leave

1. Have clear annual leave policies

It's usual to see handbooks that don’t quite cover the basics when it comes to annual leave. At the very least, these should clearly point people to where they can find their annual leave allowance (usually in their employment contract), how much time off they can take during each leave period, and the steps for requesting time off.

The policy should also serve as a gentle nudge for employees to regularly use their annual leave throughout the year. It needs to outline when leave can be rolled over (excluding any statutory minimum), and make it clear that if someone doesn’t use their leave by the cut-off date, the employer has the right to schedule their leave for them.

2. Ensure annual leave is taken

It might seem straightforward, but managing this proactively is crucial for employers. Having a policy in place is just the beginning - not the end of the process.

Employers should set up systems to monitor and track the annual leave taken by their employees. If someone hasn't taken any leave for a few months, their line manager should check in with them and encourage them to schedule some time off. 

Line managers should also keep their team informed about how much leave they have left. If employees haven’t booked their leave by the final quarter of the year, it’s important to remind them that it needs to be used. Employers might even consider helping to schedule the time off to ensure it’s taken. And if your company allows unused leave to roll over, be sure to confirm how much will carry over, or let employees know if it won’t, especially if they’ve had the opportunity to take it.

Proactively managing annual leave not only sets clear expectations, it also helps employees feel comfortable taking their time off when it works best for them, without any concerns.

3. Remove the perceived barriers 

When we break down the perceived barriers that employees feel around taking annual leave, managing it becomes much easier for employers. Performance needs to be measured against clear and reasonable targets, so employees aren't pressured into working extra hours just to meet them.

Sure, there will be times when a company is short-staffed, but it's still important for employers to emphasise the value of taking leave and encourage employees to use it. If it’s obvious that someone has too much on their plate, it’s worth considering whether new hires are needed to prevent busy periods from dragging on and potentially leading to burnout.

4. Unlimited leave policies

Some SMEs are trying out unlimited annual leave policies - but the results have been mixed. In some cases, employees end up taking less time off because there aren’t clear guidelines on what’s considered “acceptable.” 

If you’re thinking about implementing this kind of policy, it’s a good idea to set a minimum amount of leave that employees must take. Also, make sure their performance goals are clear so they can manage their work while taking the time off they need. Alternatively, some organisations are increasing the amount of guaranteed leave to emphasise the importance of time off and show that they value work-life balance for their employees.

What to do next

Whatever steps an organisation takes to encourage annual leave, it will require proactive management. It’s a crucial part of creating a happy healthy workforce. 

Discover how Breathe can support your company, with easy-to-use holiday management system. 

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