Buying and selling holiday policy

Our policy enables you to operate a scheme under which your staff can buy or sell a portion of their annual leave entitlement in a particular holiday year, subject to certain conditions.

Buy or sell?

If an employee buys extra holiday, this is by way of salary sacrifice and their annual salary will temporarily go down - but they will be taking more time off. If an employee sells holiday, their salary will temporarily increase - but they will be working on more days. Generally speaking, more employees want to buy holiday than to sell it, so it’s more likely to result in your total wage bill going down than up. 

Working time regulations

The Working Time Regulations 1998 give workers the right to a statutory minimum of 5.6 weeks’ paid annual leave, which can include the bank holidays. This equates to 28 days for a full-time worker. You can’t permit employees to sell annual leave that would take them below this statutory minimum, so if all you provide is the statutory minimum, then the most you could introduce is a buying scheme. Our Buying and Selling Holiday Policy assumes you provide more than the statutory minimum and so it enables an employee to buy or sell a maximum of one week of annual leave - you can adjust this to suit your business needs.

Conditions for buy or sell

Our policy requires the employee to submit a request form no later than one month prior to the end of the current holiday year in respect of the following holiday year. It doesn’t allow late applications, nor for buy and sell decisions to be made or changed part-way through the holiday year. This keeps it simple for administration and payroll purposes - you only have to deal with applications once per year and then they will run for the whole holiday year. We’ve also made it clear that employees have no contractual right to buy or sell annual leave and the granting of a request is entirely at your discretion.

Salary adjustment

If you do decide to grant a request, our policy provides for you to notify the employee in writing of the resulting change to their salary. It’s unlawful for you to deduct money from an employee’s salary unless they’ve given their written consent in advance (or there’s a relevant contractual provision authorising a specific deduction), so we’ve gone on to provide that the employee will then be asked to sign to indicate their written consent to the salary adjustment. If they fail to do so, their application will be cancelled. Our policy also sets out how the employee’s salary will be adjusted to deal with the buying or selling of holiday and how the cost of one day’s annual leave is calculated. Buying holiday will result in a salary sacrifice and selling holiday will result in a salary increase for that holiday year, but we’ve confirmed any adjustment has no impact on pension contributions, bonus potential or other salary-related benefits. The cost of, or credit for, the annual leave should then be spread equally over the twelve or 52 pay periods during the holiday year. Finally, we’ve covered the position should the employee leave employment part-way through the holiday year, having purchased or sold part of their annual leave entitlement.