When should you start your holiday year?

The restart of company annual leave should be one that you look forward to. But when should you restart your holiday year? We look into the potential issues business owners may face

Simon Dalley: BrightHR Brand Marketing Manager

Around 77 per cent of the businesses using BrightHR software reset their annual leave on the first of January. That means that January is a busy time as staff start submitting their holiday requests.

For employees, this is an exciting time, but for business owners, it can be the complete opposite. Business owners know that holiday requests mean a lot of paperwork and HR wrangling. There will be forms to file, spreadsheets to check, calendars to update, potential conflicts and the hope that after all that, no errors have been made. This all means that business owners and managers are spending time on admin rather than getting on with growing their business.

But do you have to start the holiday year in January? What are the issues that business owners may face when it comes to managing annual leave at different times of the year and what are the rules around setting a business’ holiday year?

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What are the holiday start date rules?

The holiday year, along with holiday entitlements, should be communicated with your staff. These should be outlined to employees in a written statement or included as part of their employment contract. Failure to outline a specific start and finish date by these methods will mean that leave will begin:

  • On the date the worker began work for the current employer, or
  • 1 October (the anniversary of the regulations becoming law).  (ACAS)

If a worker starts work part way through the company’s leave year, the initial holiday entitlement is based on the period from that date until the leave year ends.

 

Ongoing issues, no matter what time of year

One of the main problems of holiday entitlement is working out accruals for those in their first year of employment, especially when this crosses over with other leave such as sick leave or maternity leave.  

According to ACAS; “When employees are on sick leave during this period, they continue to accrue holiday at the normal rate. And if the employee can't take this leave during their first year because of sickness absence, then the employer must let all or some of it be carried over to the next year. As a minimum, the employer must ensure that the employee has been able to take or carry over four weeks' holiday a year.

“What about maternity leave? Again, the employee continues to accrue statutory minimum holiday and any additional contractual holiday entitlement. The holiday can't be used during maternity leave, though arrangements could be made to add the leave on to the beginning or end of the maternity leave period. The same goes for paternity leave.”

 

Does your holiday year start and finish really matter?

Although the majority of the companies using BrightHR choose to restart their holiday year in January, many companies choose to start their annual leave allowance in different months.

Here, we explore some of the pros and cons of each:

  • Calendar year: 1st January - 31st December

Our research suggests around 77 per cent of businesses in the UK start their employees’ holiday entitlement in January.

January offers an easy to understand starting point for holiday entitlement which is relatively simple for line managers, HR professionals and business owners to keep on top of. Unfortunately, using the start of January as the start of your employees’ holiday entitlement can lead to a rush to use up entitlement in the lead up to Christmas and over the Christmas period which can leave your operation stretched during the festive period.

Additionally, this can further add to the surge in holiday requests in the first week back in January, which is already traditionally the busiest time of year for requesting annual leave. This is coupled with the time of year that business owners really want to concentrate on the future of their business.

  • Financial year: 1st April to 31st March

There are a growing number of businesses aligning their employee holiday entitlement to the financial year, especially in those companies with finance teams which are looking to comply with the new reporting requirements of FRS 102. By aligning your holiday allowance this way financial reporting may be much simpler.

However, one of the main problems with starting your holiday entitlement on the 1st April is the date of the Easter Bank Holidays.

While you will always get more holiday requests for the Easter period, as parents look to take time out with the family, if Easter occurs before April you will also be faced with people trying to use up their annual leave before they lose their entitlement.

  • Employee start date

Some companies choose to begin the annual leave year on the date that the individual employee starts at the company. The benefit of this is that there are no tricky calculations when it comes to accruals. This will save time and effort, initially at least.

However, there may be potential issues down the line when it comes to how many holidays staff have left, carrying over holidays and updating the holiday year. These problems can be accentuated if an employee leaves or has their contract terminated. If owners don’t have a robust and accurate holiday management system in place, this is when systems are going to go wrong.

  • Summer year

In education it is common to run holiday allowance between 1st September to the 31st August, aligning the entitlement with the academic year. This is also becoming much more common with companies who are hiring large amounts of graduates or school leavers.

That is not to say that you have to use the 31st August, you could choose anytime over the summer months. The advantage of this is that employees will often be planning to take holidays over this period for months in advance. Due to the planned holiday activity in this period there will be less of a surge in holiday requests at the end of the holiday entitlement year.

 

Doing what’s right for your business

Ultimately, you must do what is right for your business. If you have a lot of graduates, operating a summer start pattern could be right for you. If you want to keep things simple for everyone to understand, maybe then a January start pattern is better for your business.

Whatever holiday start date you choose, putting in place policies and procedures around your holiday entitlement is essential. An effective absence management process can help you overcome the hassle associated with dealing with holiday request submissions.

 

Find out how BrightHR can help you overcome your holiday hassle by automating and streamlining your absence management processes by offering a free 30-day trial to small business owners (and after that it's only £2 per employee per month).