16 March 2026
Many organisations operate a holiday year running from April to March, often aligning with the tax year.
As the end of March is fast approaching, it is a common situation for employers to see an increase in queries from employees asking for their unused holiday pay to be paid instead of taken. While this might seem like a practical solution, holiday entitlement is not designed to work this way.
Under UK Working Time Regulation rules, most workers are entitled to 5.6 weeks of paid annual leave. The expectation is that this holiday should be taken during the leave year.
Annual leave exists primarily for an employee to take time away from work to rest, recharge and maintain their wellbeing. For that reason, employers generally cannot replace unused statutory holiday with a payment in lieu.
In most cases, payment for unused statutory holiday is only permitted when employment ends. At that point, any outstanding entitlement can be calculated and paid as part of the employee's final pay. If an employer offers more than 5.6 weeks of annual leave, this can be called 'enhanced' or 'contractual' holiday. They can agree separate arrangements for this extra leave.
As this period draws to a close, employers should review all untaken holidays and allow this time off to be taken or review agreements for employees to carry over untaken holiday to the next year.
Employers have a legal responsibility to make sure workers can take the holiday they're entitled to.
By law, a worker can carry over holiday if their employer:
- does not let them take all their holiday or does not encourage them to take it all
- does not inform a worker that they will lose any holiday they do not take.
In these circumstances, they can carry over a maximum of 4 weeks' holiday entitlement.
To encourage workers to take holiday, employers could:
- have a policy that sets out clearly that workers will lose holiday they do not take
- cover this in training for managers
- send out email reminders to workers
- remind workers to take holiday in one-to-one and team meetings
- make clear on any forms or systems for booking holiday that workers will lose holiday they do not take.
Ultimately, holiday entitlement is there for a reason. It is not simply an additional financial benefit, but a vital part of maintaining a healthy, balanced working life. This is not only beneficial for employees, but it also helps organisations maintain a more engaged and productive workforce for businesses.
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