When an employee hands in their resignation — or you issue a dismissal notice — one of the first questions that arises is what happens to their annual leave. Can they take holiday during the notice period? Can you force them to use it up? And what about accrued leave they haven't taken? This guide explains every angle UK employers need to understand.
Yes. An employee's statutory right to annual leave does not disappear simply because they are working their notice. During the notice period, the employee remains employed and continues to accrue leave in the normal way. They are entitled to request holiday just as they would at any other time.
However, the employer retains the right to approve or refuse a leave request during notice, subject to the same rules that apply throughout the employment. An employer can refuse a holiday request by giving counter-notice of at least the same length as the leave requested. For example, if the employee requests 3 days off, the employer must give at least 3 days' notice of refusal.
In practice, most employers approve reasonable leave requests during notice periods. Refusing without a genuine business reason can damage the relationship and make the handover more difficult than it needs to be.
Yes, but with conditions. Under the Working Time Regulations 1998, an employer can require an employee to take annual leave on specific dates. To do this, the employer must give notice equal to twice the length of the leave being imposed.
For example, if you want to require an employee to take 5 days of holiday during their notice period, you must give them at least 10 days' notice of this requirement. If the notice period is only 1 week, there may not be enough time to compel the employee to take more than a couple of days.
This power is particularly useful when an employee has a large accrued balance and you want to avoid a significant payment in lieu at the end. However, it must be exercised fairly — compelling an employee to take all their remaining leave during notice when there is important handover work to complete could be seen as unreasonable.
If the notice period is too short for the double-notice rule, the employer cannot force the employee to take leave and must instead pay in lieu for any unused entitlement.
When an employee leaves — whether through resignation or dismissal — they are entitled to be paid in lieu for any accrued but untaken annual leave. This is a statutory right under the Working Time Regulations and cannot be overridden by contract.
The calculation is straightforward: work out how much leave the employee has accrued up to their last day of employment, subtract any leave already taken, and pay the balance.
Accrued leave = (Days worked in leave year ÷ Total days in leave year) × Annual entitlement
Example: An employee with 28 days' entitlement leaves 6 months into the leave year having taken 10 days:
Accrued = (182 ÷ 365) × 28 = 13.96 days. Untaken = 13.96 − 10 = 3.96 days paid in lieu.
Conversely, if the employee has taken more leave than they have accrued at the point of leaving, the employer may be able to deduct the overpayment from their final pay — but only if a clawback clause exists in the employment contract. Without such a clause, recovery is difficult.
The rules on annual leave during notice are the same regardless of whether the employee resigned or was dismissed. In both cases:
However, there are practical differences. When an employee resigns, they are typically motivated to use up remaining leave. When an employer dismisses (especially in redundancy), the employer often wants the employee to use their leave balance during notice to minimise the final payment. In either case, the statutory rules remain the same.
Garden leave is when an employee is told not to come into work during their notice period but remains employed and paid. It is commonly used for senior employees, those with access to sensitive information, or those joining a competitor.
A key question arises: can annual leave run concurrently with garden leave? The answer depends on the contract:
Note that garden leave and annual leave are not the same thing. An employee on garden leave is still available for work if recalled. An employee on annual leave is not. This distinction matters for Working Time Directive compliance.
Working out accrued leave, used days, and payment in lieu manually is error-prone — especially mid-year. Leavely takes the guesswork out of it: