Long service holiday award letter

If employees qualify for an increase in their paid annual leave entitlement after they’ve been employed by you for a defined period of time, you can use our letter to notify them of their increased entitlement.

Service-related annual leave

Some employers have arrangements in place whereby an employee’s paid annual leave entitlement increases with length of service. Such arrangements may be indirectly age discriminatory against younger workers under the Equality Act 2010 and so would need to be objectively justified. However, there’s an exception in that legislation which enables you to provide benefits that reward long service, such as an increase in paid annual leave entitlement, but the exception differs depending on whether the length of service required to qualify for the extra annual leave (or other benefit) is up to or more than five years.

Length of service

It's lawful to have service-related benefits for employees if the length of service requirement is five years or less. So, if, for example, you increase paid annual leave entitlement once an employee has been employed for five years (or less, e.g. four years), that’s perfectly acceptable. Where, however, the service requirement is more than five years, you can only rely on the statutory exception if you reasonably believe that the way in which you use the service criterion “fulfils a business need”. A business need here might include rewarding higher levels of experience, encouraging loyalty or motivating long-serving staff. Whilst this business need test isn’t as onerous as showing objective justification for indirect age discrimination, you do still need to have evidence to support your reasonable belief that you’re fulfilling a business need by, say, increasing paid annual leave entitlement once an employee has been employed for ten years. Your evidence could include information gathered through staff attitude surveys or focus groups where employees have confirmed that they think the additional paid annual leave will reward their experience, encourage their loyalty or motivate them.

Letter content

Our Long Service Holiday Award Letter is designed to support our Long Service Awards Policy and it has three alternative options for increasing paid annual leave entitlement, and we’ve left it to you to decide on the length of service milestone, taking account of the business need test above. The first option is for the employee to receive a permanent increase in their annual leave entitlement at a designated service milestone, e.g. an increase from 25 to 30 days after five years’ continuous service. The second option is for them to receive a rolling annual increase in their annual leave entitlement from a designated service milestone and running for a set number of years, e.g. an additional day’s leave after five years’ continuous service and then an extra day’s leave for each subsequent year of service up to a maximum of five additional days. The final option is for them to receive a one-off additional paid annual leave award at a designated service milestone, e.g. an additional day on five years’ continuous service, but to apply for that holiday year only.