Holiday – Use it or Lose it

What you have to do to be able to rely on the ‘use it or lose it’ principle.

Many organisations operate a use it or lose it policy with holiday entitlement. What this means is that if an employee does not take their holiday within the company’s specified holiday year (the most common holiday years are January to December or April to March), then they lose it.

Case law has confirmed what steps employers must take if they wish to enforce the “use it or lose it” rule as follows.

A worker should NOT automatically lose their right to paid annual leave because they did not apply for it, unless the employer could demonstrate that the worker deliberately refrained from taking the leave “in full knowledge of the consequences”.

The court went on to give guidance on what would be required and said that the employer must inform the worker of the leave they have outstanding and in good time for them to take it. If the worker still does not take leave, then they will lose their right.

Holiday Entitlement

Importantly the onus is on the employer to prove that they have communicated this and to show that the worker was able to take annual leave. Any communication to the worker must also confirm that untaken leave will be lost if not taken.

Therefore, to be able to rely on the ‘use it or lose it’ rule, you need to have in place clear procedures for communicating to employee and accurate records of outstanding holiday.

Another solution is to automate this process.  Our HR Portals includes a holiday module that clearly shows employees how much holiday they have left at any point in the holiday year. It also sends automatic reminders to employees to book holidays and reminds them of the use it or lose it rule.

It can be extremely difficult and time consuming to keep tabs on holidays and communications if you use a manual system. Using will save time and allow you to keep track of holiday easily; and where appropriate allow you to rely on the use it or lose it principle.

Legal Reference: In the UK the use it or lose it principle is set out in regulation 13 Working Time Regulations, which says that leave “may only be taken in the leave year in respect of which it is due”. This principle has already been significantly qualified by case law in the event of long-term sickness and maternity leave, or if entitlement has been positively denied by the employer. This latest ruling from the ECJ potentially extends these exceptions to cases where the employers have not done enough to encourage workers to take their leave.

Fiona Haworth

You can contact Fiona on [email protected]

If you feel that you need guidance or advice on this matter, please call Practical HR on 01702 216573 or email Fiona on the above.


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