Understanding Accrual Leave and the Working Time Regulations

Grasping the basics of accrual leave under the UK Working Time Regulations 1998 might seem straightforward at first, but the details can quickly become intricate. This guide walks you through various accrual methods for workers and explores the unique aspects of the Working Time Regulations.

What is Accrual Leave?

Accrual leave refers to a system that allows employers to specify that employees don’t receive their full leave entitlement at once. Instead, they "accrue" this leave over a period, typically a year.

For instance, if an employee is entitled to 28 days in a year, and they accrued leave, they would receive 2.33 days every month of the year. Below is a table illustrating how this would look over a year:

On the 1st day of each leave month, the employee is entitled to 2.33 days. So on the 1st day of the last leave month of the year, e.g., 1st December, they will be entitled to the full entitlement.

Hourly Accrual Employee

A different approach can be used for hourly workers. They can accrue 1/12th of their leave entitlement, similar to daily accrual above. They can also accrue time as a percentage of hours worked.

Typically, this accrual percentage is set at 12.07%. The reason being, 5.6 weeks is the annual entitlement for daily workers, which is 12.07% of the year (5.6/46.4 * 100). For example, if an employee worked 100 hours in a month, they’d be entitled to 12.07% of leave, so 12.07 hours of leave entitlement.

When calculating this, hours worked does not include any paid hours for being on leave.

Legality of this method

This method has proved controversial due to the Harpur Trust vs Brazel judgment. This method recently been proposed for 2024 legislation, read more on our article covering this here.

What if an employee who accrues leave joins mid-leave year?

If an employee joins in the middle of a leave year, they still accrue leave of 1/12th of their entitlement each month of the year.

For instance, if an employee was to join in July 2024, with a leave year of January to December, they’d accrue 2.33 days on their first day and 2.33 days every month thereafter up to December.

But what if an employee joins after the 1st of the month?

If an employee joins after the 1st of the month, let’s say the 15th of the month, this is an unclear scenario. The regulation says accrued leave should be calculated on the 1st of each month but this would mean they wouldn’t have access to their leave entitlement by the end of the leave year as they’d miss out on their first month of entitlement.

A fairer policy is where accrued leave is credited on the monthly anniversary of the employee's start date, such as the 15th of every month in this example. This means they would always have access to their full leave year entitlement.

Leaving Mid-Year

For a worker who accrues leave based on an percentage of hours, the calculation is simple, e.g., 12.07% * hours worked is their leave entitlement is what they would be entitled to.

For a daily or hourly accrual worker, the calculation is a bit more complicated. The final accrued entitlement is calculated as a percentage of the year worked times the days in the year (rounded to the nearest tenth).

Example 1: Employee Leaves Mid Year

Total Entitlement for Year = 28

Employee leaves on 2nd November, from start of leave year 1st January = 305 days

Days in Year = 365

Percentage of Year Worked = 305 / 365 = 83.56%

Final Accrued Entitlement = 28 * 0.8356 = 23.39 days = 23.4 days (rounded up to nearest tenth)

Example 2 : Employee Joins Mid Year and Leaves Mid Year

Total Entitlement for Year = 28

Employee leaves on 2nd November, joined on 1st February = 274

Days in Year = 365

Percentage of Year Worked = 305 / 365 = 75.07%

Final Accrued Entitlement = 28 * 0.7507 = 21.02 days = 21.1 days (rounded up to nearest tenth)

Working Time Regulation Provisions

Accrual In The First Employment Leave Year?

Accrual is typically used in the first year of an employee starting in a business so they can build up their leave entitlement over the course of the year. From their 2nd year, they should typically have access to their full leave entitlement.

The regulation doesn't stipulate that employees can’t accrue leave in their 2nd and subsequent years at a business though. Businesses commonly use the accrual method beyond their first leave year for employees.

The First Employment Year

The regulation stipulates accrual should be used in the first year of employment, however it's unclear from reading whether this is the:

a) First Leave Year while in Employment

b) Year Up to the Employee's First Work Anniversary

If an employee joined in July 2024, it's a question whether they should accrue leave to June 2025 or only until December 2024.

From speaking to companies on the matter, typically they consider the employment year to be their first leave year only purely for practical purposes.

Rounding Up

Accrual also comes with some rounding provisions.

The WTR says

“Where the amount of leave that has accrued in a particular case includes a fraction of a day other than a half-day, the fraction shall be treated as a half-day if it is less than a half-day and as a whole day if it is more than a half-day.”

What this means in practice, if I accrue 2.33 days, I should be able to book 2.5 days. 2.5/3 days would stay the same as already half/full days. Using the accrual example above.

Hopefully this article provides a insight and understanding of implementing an accrual system in your business, while also shedding light on some of the less clear-cut situations that can emerge with its use.

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