First published: November 3rd 2020
Last updated: April 24th 2023

How to handle unused annual leave

Unused annual leave became a particularly hot topic for many employers during the pandemic. Between travel restrictions and lockdowns, employees didn’t use their annual leave entitlements as they normally would.

This set of circumstances led to employees reaching the end of the leave year with a substantial amount of annual leave still left to take.

There are employment laws dictating how annual leave should be treated each year. In this post, we’ll take a look at some of your options as an employer if staff reach the end of the leave year with a substantial amount of unused annual leave.

Is there actually a build-up of unused annual leave entitlements?

Depending on the type of year your business has experienced, it’s possible that your staff may reach the end of the leave year with unused annual leave.

Sometimes during a very busy year, staff might take minimal holidays to meet business demands. If this is the case, you must ensure staff take some time off for rest and recreation. Paid annual leave is in fact a health and safety measure that aims to protect the health and wellbeing of employees.

The law also requires you to keep records of your employees’ working hours. All employees who have completed 1,365 hours of work during the leave year are entitled to four weeks’ paid annual leave.

If you are reaching the end of the leave year, you need to consult your records to calculate the precise amount of annual leave the employee is entitled to and how much is unused.

Staff only accrue annual leave entitlements from the date they begin work. If an employee started work midway through the year for instance, their annual leave entitlement would be around half the annual four week minimum.

Also consider if it was necessary to lay staff off temporarily during the leave year. Laid off employees don’t accrue annual leave while they’re not working on a period of layoff.

Use the Organisation of Working Time Act 1997

The Organisation of Working Time Act 1997 entitles employees to four weeks’ paid annual leave during any given leave year.

Under Section 20 of the Act, employers have discretion to decide when their employees take their annual leave.

When doing so, it’s important to account for your business requirements and consider:

• The need for the employee to reconcile work and any family responsibilities.
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• The opportunities for rest and recreation available to the employee.

If you’re relying on Section 20 to get employees to take their annual leave, you must give them at least one month’s notice of the dates you require them to take their time off.

Carryover of annual leave in Ireland

Annual leave carryover in Ireland can be a difficult area for both employers and staff. Especially if your employment contracts don’t set out your business’s position.

Your employees may ask can they lose annual leave or request to carry forward annual leave. To handle these queries consistently, you need a clear annual leave policy.

For instance, the contract might specify that your annual leave year runs from January to December. During your annual leave year, unused annual leave can build up. If this has happened, you must discuss with your employees how they can use their unused annual leave entitlements.

You may operate a policy that prohibits employees from carrying annual leave into the next leave year. If so, you need to ensure your staff receive their full four weeks of paid annual leave before the end of the leave year.

Of course, you may be an employer who allows employees to carry unused annual leave into the next year. If you do, don’t forget to update the annual leave balance for the following leave year.

Annual leave needn’t be complicated

Worried about unused leave? If you’re a Peninsula client, you can call our 24/7 helpline for instant, unlimited advice on how to manage unused annual leave.

Not a client? No problem.

You can still claim a free advice call with one of our HR experts today.

To speak to an expert and get the latest guidance on unused annual leave, call 1800 719 221