Five tips for managing holiday in a small business

Eleanor Deem gives her top 5 tips for managing holiday entitlement and pay

In a very small business with maybe three or four staff, all working full time, managing holiday is relatively straightforward. But as a small business grows, and there are more staff to manage, and perhaps different part-time working hours involved, it can become more difficult.

Here are my five top tips to ensuring you manage the holiday process effectively, without too much disruption, and without falling foul of some key legal requirements.

1. Be clear about how holiday booking works

Many small business owners get themselves into difficulty when staff aren’t clear about how to book holiday, and what the decision-making process is when more staff want to take annual leave than you can allow at the same time.

That doesn’t necessarily mean a lengthy policy, just clarity on simple things like what staff should do if they want to book holiday, where and how holiday is recorded, how they can find out how much they have left, any restrictions around holiday booking (such as number of staff who can be off, any seasonal restrictions), and how holiday at popular times is allocated.

Clarity and openness on how it works in your business will reduce the likelihood of actual or perceived unfairness and will help things run more smoothly.

2. Allocate part-time holiday correctly

Part-time staff in your business are entitled to the same holiday entitlement on a pro-rata basis as full timers. You need to make sure your part-timers get the correct amount, based on the hours they work. If they work the same hours each day, then you can keep the holiday entitlement as being expressed in days. If they work variable hours, then calculating and booking holiday in hours is more sensible and accurate. The Gov.UK website has a useful guide to calculating holiday entitlement and pay.

3. Remember holiday entitlement for long term absence

Don’t forget that staff who are on maternity leave, other family leave or are off long-term sickness absence continue to accrue holiday during their absence. With long family leave absences, it’s best to encourage them to take at least some of the annual leave they will accrue before they go, otherwise they’ll come back having accrued up to a whole year of annual leave that needs to be taken.

Staff on long term sickness absence also continue to accrue holiday, and if they do not have the opportunity to take it during the holiday year, you must allow them to carry at least four weeks of it over. Alternatively, with their agreement, they can take some holiday during their sickness absence.

4. Make sure staff are paid correctly when on holiday 

There has been much case law around holiday pay over the last few years. The principle is that when someone is on holiday, they should not be disadvantaged financially, so their pay whilst they are off should reflect what they would have been paid had they been at work. 

This means that bonuses, commission payments and regular overtime payment should all be taken into account when calculating what someone should be paid whilst on annual leave.

5. Ensure staff actually take their holiday!

Sounds obvious, but it is not at all uncommon for hard working staff in small businesses to not get around to taking their full holiday entitlement, or to feel they cannot take it due to the disruption and inconvenience it will cause the business. It’s your responsibility to make sure staff take their annual leave.

 If they have concerns about cover, take steps to reassure them, and review annual leave bookings regularly so that you don’t end up near the end of your holiday year and find several staff with a couple of weeks to take, leaving your business with only a skeleton staff at a busy time. Plan ahead!

Author: Eleanor Deem is the founder of face2faceHR and is an experienced HR professional with a background working in the private and not-for-profit sectors.

Explore related resources

These areas of the People Skills Hub will help you to address some of the issues covered in this blog:

  • Holidays and time off: Find out how to manage annual leave, the amount and the pay, and how to ensure your staff take the time off that they need
  • Family leave: Access guidance on how to manage employees going on maternity, paternity, adoption and shared parental leave
  • Absence: Understand how to manage absence (both planned and unplanned) and how to support your staff on their return to work