Company Holiday Policy Templates & How to Write One

Published:

Feb 13, 2024


When it comes to creating a company holiday policy, it is essential to understand that these are critical for managing employee absences due to sickness during holiday periods, ensuring both compliance with legal standards and regulations and fairness across your whole organisation.

As a result, we have put together this handy guide on Holiday Policies to outline the key components to consider when drafting a holiday sickness policy for your company. 

Benefits of a Holiday Policy 

✅ A clear holiday policy ensures that all your employees understand their rights and obligations regarding holiday leave. 

✅ By outlining holiday entitlements and procedures, a holiday policy helps ensure that your company complies with local and national employment laws. Which in turn reduces the risk of legal challenges and penalties associated with non-compliance.

✅ Knowing that the company recognises and respects the importance of time off for rest and recreation can significantly boost your employee morale. A fair and generous holiday policy can also make employees feel valued and appreciated, leading to higher job satisfaction and employee retention.

✅ A holiday policy that supports the work-life balance helps employees recharge and spend time with their families or on personal pursuits. This balance helps to maintain productivity and keep it higher than it would be otherwise.

✅ Competitive holiday benefits can be a significant factor in attracting and retaining top talent. Prospective and current employees, for instance, often consider holiday entitlement and flexibility as critical components of their overall benefits package.

✅ A clear holiday policy that allows employees to plan and take time off can reduce unscheduled absences. Employees are, therefore, less likely to take unplanned leave when they have structured and predictable opportunities for rest.

Table of Contents

  1. Purpose of a Holiday Policy

  2. Who Does a Holiday Policy Need to Apply To?

  3. Compliant with Legal Frameworks

  4. Holiday Entitlement

  5. How is Holiday Pay Calculated for Part-Time Employees?

  6. What Happens if Holiday Carry-Over Is Unused?

  7. How Can Holidays Be Requested?

  8. Outline the Approval Process

  9. Public Holidays

  10. Holiday Policy Abuse

  11. Policy Review and Changes

  12. Communicating Changes

  13. Questions and Contacts

  14. Looking for More than a Copy and Paste Holiday Template?

  15. The Law Around Holiday Policy & Having a Dedicated Document for It

  16. Why is a Holiday Policy Important?

  17. Which Holidays are Included in the Holiday Policy?

  18. How Should a Company Handle Holidays That Fall on a Weekend?

  19. Can Employees Work on Holidays and Receive Alternative Time Off?

  20. How Does the Holiday Policy Affect Employees on Probation?

  21. Are Temporary or Seasonal Employees Eligible for Holiday Benefits?

  22. What Happens if an Employee is Sick During a Holiday?

  23. How are Holidays Handled During Maternity or Paternity Leave?

  24. Should the Company's Policy on Religious Holidays be Included?

  25. Related Legal Articles

  26. What are the Common Pitfalls of a Holiday Policy?

  27. Holiday Policy Templates Final Thoughts

  28. Ready to Get Started With Your Template?

Purpose of a Holiday Policy

The purpose of a holiday policy is to establish a transparent and fair framework for managing your employee's time off and downtime - ensuring both compliance with legal regulations and alignment with your company's operational needs.

It also provides employees with a transparent understanding of their holiday rights, including how to book time off, how holiday pay is calculated, and the procedures for handling public holidays - such as Bank Holidays in the UK and Federal Holidays in the US, for instance - as well as possibly absence due to illness.

By setting out these guidelines, your holiday policy aims to bring a balanced approach to work and rest within your organisation, supporting your employees' well-being while keeping productivity and business continuity as high as possible.

Who Does a Holiday Policy Need to Apply To?

Your holiday policy applies to all your employees of the company, encompassing full-time, part-time, and fixed-term staff.

However, contractors and freelancers are excluded from this policy as their terms of engagement are instead governed by separate contract agreements, such as consultancy agreements

Consequently, all your employees must familiarise themselves with the provisions of this policy to fully understand their holiday entitlements and the procedure for booking time off to ensure clarity and prevent misunderstandings from developing.

Compliant with Legal Frameworks

Ensure the policy meets or exceeds statutory minimum holiday entitlements.

When crafting your company holiday policy, it can be essential to reference and comply with relevant employment laws and regulations across different jurisdictions. 

UK

In the UK, the Working Time Regulations 1998 dictate minimum holiday entitlements. 

United States

In the US, the Fair Labor Standards Act (FLSA) does not mandate paid leave, but state laws may offer provisions.

EU

Whilst for example, within the EU, the Working Time Directive (2003/88/EC) establishes minimum standards for holiday entitlement for member countries - ensuring workers have adequate rest and leave. 

As a result, you should always align your Holiday policy with these regulations, ensuring that it is legally compliant with where your staff are based and supports the well-being of your employees across different regions at the same time.

Holiday Entitlement

Holiday entitlement can vary massively depending on the legal jurisdiction in which you and your employees are based. For instance, this could consist of:

UK

In the UK, employees are entitled to a minimum of 28 days of paid holiday per year - including public bank holidays.

This statutory entitlement applies to all full-time workers, with part-time workers receiving a pro-rata amount instead.

Additionally, it is common for companies to offer additional holiday entitlement as a benefit, which should be specified in the employment contract.

US

The US does not have a federal law requiring paid holidays for employees. 

Instead, holiday entitlement is at the discretion of the employer and is typically outlined in the employee handbook or employment contract. 

It is also common for US companies to offer between 10 to 20 days of paid holiday per year as well.

EU

In the European Union, member states guarantee a minimum of 4 weeks (20 days) of paid annual leave, excluding public holidays.

Furthermore, employers can offer additional holiday days as part of the employment agreement, often as an incentive or benefit.

How is Holiday Pay Calculated for Part-Time Employees?

How holiday pay is calculated can also vary massively from jurisdiction to jurisdiction. For instance:

UK

In the UK, part-time employees are entitled to the same holiday entitlement as full-time employees - pro-rated based on the number of days or hours they work. 

For employees joining or leaving part-way through the holiday year, their entitlement is calculated on a pro-rata basis, ensuring they receive a fair portion of their annual leave relative to the portion of the year they have worked.

US

However, in the US, holiday entitlement for part-time employees varies by employer - as there's no federal mandate for private employers to provide paid leave.

Employers, for instance, may pro-rate holiday entitlement based on hours worked. For new hires or employees exiting the company, entitlement is often calculated proportionally to the time worked during the fiscal year, for example.

EU

Within the EU, part-time employees' holiday entitlement is proportional to their working hours, aligned with the principle of equal treatment for part-time and full-time workers. 

For those joining or leaving during the holiday year, entitlement is calculated on a pro-rata basis, according to the duration of employment within the holiday year.

What Happens if Holiday Carry-Over Is Unused?

Again, this depends massively on each jurisdiction your employees reside in and are citizens of.

For instance:

UK

In compliance with UK law, employees are permitted to carry over up to 5 days of unused holiday into the next holiday year - subject to managerial approval. 

This policy aims to provide flexibility while ensuring that employees take their minimum statutory leave entitlement. 

However, any carry-over must be used within the first three months of the new holiday year unless exceptional circumstances apply, such as long-term illness or maternity leave, where specific rules may extend this period.

US

United States' carry-over policy allows for limited holiday carry-over to accommodate varying state laws and company discretion. Employees may carry over unused vacation days, with a maximum of 5 days, for instance, subject to approval by their direct supervisor. 

Any agreed-upon carry-over must also be utilised within the first quarter of the following year.

EU

Within the European Union, holiday carry-over policies adhere to the local country laws - with a general allowance for employees to carry over unused statutory holiday entitlements to the following year. 

The exact number of days and conditions under which carry-over of holiday is permitted will vary by member state. 

How Can Holidays Be Requested?

How holidays and annual leave should be requested should be included in your holiday policy.

For instance, it could include that employees must submit their request through the company's holiday booking system at least X period in advance.

It is also a good idea to include:

1) How the employee can book a holiday

2) Are there any rules about multiple vital members of staff being off at the same time that may leave the company vulnerable in a critical area

3) How the employee can view any existing up and coming holiday they have

Outline the Approval Process

An excellent area to include is to outline the approval process. For instance, once a holiday has been requested, what is the approval process for holiday requests that the employee can come to expect?

This outline helps to ensure fairness and operational efficiency in the process - especially in large-scale companies.

For instance, you could include something like:

"Employees are required to submit their holiday requests via the designated system or form, providing at least [specified number] weeks' notice. 

Requests are reviewed on a first-come, first-served basis, taking into account departmental staffing needs and pre-existing holiday bookings. 

Your direct supervisor - or designated manager - will approve or deny requests, aiming to respond to them within [specified time frame]. 

In cases where a request cannot be accommodated, alternative options may be discussed with you.

All our employees are encouraged to plan their holidays in advance to minimise disruptions to the company and your department and to help to a quicker approval."

Public Holidays

In a holiday policy template, it is good practice to list / include a Public Holidays section. 

His section should provide a comprehensive list of all public holidays recognised by the company to avoid any disputes and conflicts from what your employees can classify as a public holiday if they differ.

This list will then help to inform your employees of the days when they are not expected to work - unless specified otherwise. 

Additionally, it's crucial to clarify the company's stance on working during these holidays. 

If employees are required to work on a public holiday, for instance, your holiday policy must detail any enhanced pay rates or compensatory time off they will receive as a result of doing so.

This detail ensures you deliver transparency and fairness in managing public holiday work expectations - aligning with the company's commitment to employee well-being as well as your legal compliance.

Holiday Policy Abuse

In crafting a company holiday policy, it's critical to address the repercussions of any holiday policy abuse - such as submitting fraudulent holiday requests. 

For instance, you can lay out that employees found violating this policy may face disciplinary actions, ranging from formal warnings to termination of employment, depending on the severity of the misconduct found. 

By including such measures in your policy helps to ensure fairness and deter misuse of the holiday system.

Policy Review and Changes

Another good section to include is describing that the policy can be subject to review and how employees will be notified that it has been changed.

For instance, including a section around how a holiday policy is designed to be a living document, subject to periodic reviews and amendments to ensure it remains up-to-date with current laws, regulations, and company needs, is always best practice.

Communicating Changes

You can then further describe how communicating changes to the policy will be handed to your employees through, for instance, company-wide emails, updates on the internal employee portal, and, where necessary, in team meetings or through direct communication from their managers. 

This approach then helps to ensure that all employees are kept informed of any adjustments to their holiday entitlements - or the procedure for booking time off. Which, in turn, helps maintain transparency and fairness within your workplace.

Questions and Contacts

A final good section to include, often, is any contact information for employees to ask questions or seek clarification about the holiday policy.

This could be the contact details for their line manager or any HR contact, for instance.

The Law Around Holiday Policy & Having a Dedicated Document for It

Please note that the law on holidays changes frequently and is sometimes complicated, especially in some jurisdictions - so many employers choose to include procedures relating to holidays in a separate holiday policy rather than in the employment contract.

This dedicated holiday policy then means it is often easier to change the policy and avoid the employment contract being too long and unwieldy.

As this is also a policy it is subject to different rules than a contract as well, making it more suitable for its own document.

Therefore, this holiday policy explains what holiday an employee is entitled to, the procedure for requesting a holiday, the rules on holiday carry over and the interaction of holiday with other forms of paid leave.

Drafted with

It should be drafted (and read in conjunction with) the holiday clauses in the company’s employment contracts to ensure that there is no inconsistency or conflict between the two as well.

Why is a Holiday Policy Important?

Employees must be aware of the procedures and requirements in relation to requesting and taking holidays. 

With a straightforward procedure in place, there will be certainty for your employees and consistency of treatment, which can lead to disputes and tribunals.

Consequently, as an employer, it is essential that you retain flexibility to change the policy to reflect changes to the law and practice.

Hence, detailed procedures relating to holidays should be included in a separate policy rather than the employment contract.

Which Holidays are Included in the Holiday Policy?

The included holidays typically reflect national or public holidays relevant to your company's location or where your employees reside.

For example, in the UK, this may include New Year's Day, Christmas Day, and Bank Holidays for instance.

The policy should also list all recognised holidays and may also include company-specific holidays - reflecting your organisation's culture or values.

How Should a Company Handle Holidays That Fall on a Weekend?

When a public holiday falls on a weekend, the company may include in its policy to designate an alternative day off instead - typically the following Monday. 

This way, it helps to ensure your employees still benefit from the holiday and the company is still legally compliant under many jurisdictions.

Consequently, the policy should clearly state how these situations are handled to avoid any confusion.

Can Employees Work on Holidays and Receive Alternative Time Off?

Suppose your company allows - either due to legal regulations or incentives - to enable employees to work on a holiday and take alternative time off. In that case, this should be addressed in your holiday policy.

For instance, this should be addressed in the policy, including how the alternative time off is scheduled and any applicable compensation rates, to further ensure transparency and agreement.

How Does the Holiday Policy Affect Employees on Probation?

Employees on probation are typically entitled to the same holiday benefits as permanent staff, but the policy may specify any differences.

Clear guidelines, especially here, help manage expectations and ensure fair treatment of all employees- especially new starters.

Are Temporary or Seasonal Employees Eligible for Holiday Benefits?

The policy should specify eligibility criteria for temporary or seasonal employees, including any pro-rated holiday entitlement. 

This clarification helps your company's stance and ensures equitable treatment of all workers.

What Happens if an Employee is Sick During a Holiday?

If an employee is sick during a holiday, they may be entitled to reclaim the holiday day and instead take it as sick leave instead if they so wish.

Consequently, your holiday policy should detail the procedure for reporting illness and any required evidence, such as a doctor's note.

How are Holidays Handled During Maternity or Paternity Leave?

Another area to consider including in your holiday policy is around employees on maternity or paternity leave and the fact that they still accrue holiday entitlement as if they were working. 

The policy should explain how these holidays can be taken, either before or after the leave period, as well, helping to ensure your employees get all their entitlement.

Should the Company's Policy on Religious Holidays be Included?

Yes, the policy should acknowledge the diversity of the workforce and outline accommodations for employees observing religious holidays that are included by law in the employee's jurisdiction.

Alternatively, if not included, how will the company handle such situations should be included - just as a good practice?

This may involve flexible scheduling or even unpaid leave options where legally allowed to do so.

Related Legal Articles

What are the Common Pitfalls of a Holiday Policy?

As you can see above, there are many pitfalls that you must navigate when it comes to your holiday policies, especially for more international-based clients.

For instance, some of these pitfalls may consist of:

Not having a Holiday Policy

With a holiday policy, there may be clarity over expectations and requirements in relation to holidays, which could lead to far fewer disputes than not having one in place.

Having a Holiday Policy that Contradicts the Employment Contract

It is crucial to ensure that your holiday policy is consistent with the holiday clauses in the employment contract to guarantee that they do not conflict - or contradict each other. 

If they do contradict or conflict with each other, they could easily lead to uncertainty and disputes with employees if they do.

Having a Contractual Holiday Policy

The employment contract contains the terms and conditions that govern an employee’s employment. 

Generally, changes can only be made to it with the consent of both parties. 

Usually, an employer will want to make changes to its policies and procedures regularly and, in certain situations, may wish to avoid following them to the letter - particularly if the law changes. 

Non-Contractual

For these reasons, the holiday policy should be non-contractual so that it does not form part of the employment contract, and changes can be made quickly by drawing up a new contract and asking your employees to sign it.

Otherwise, it will need to obtain staff agreement to any changes, however small.

The holiday policy should clearly state that it is not contractual, i.e. that it does not form part of the employment contract.

Including too much legalese and detail

The best policies are clear, concise and easy to navigate and understand. 

Policies that are long, unwieldy and full of jargon are unlikely to be used or understood.

Not keeping the Holiday Policy up to date

Employment law can change frequently, and this is particularly true in relation to holidays.

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