Managing clashing holiday requests

Three people on a team of fifteen ask for the same two weeks in August. Two have school-age kids, one has booked a non-refundable trip, and you have to pick. Most advice on this stops at "be fair, communicate clearly, consider the team." That is not enough, because the things that actually decide whether your decision holds up are in the rules: the notice deadlines in the Working Time Regulations 1998, the duty to encourage staff to take their leave that became UK law in January 2024, and the discrimination risk in the rule most small businesses reach for by default.

The notice rules your contract probably doesn't cover

Regulation 15 sets the default notice rules, and they apply whenever your contract doesn't mention notice for holiday. A lot of SME contracts don't.

The default works on a ratio. To take leave, a worker has to give notice of at least twice the length of the leave: two weeks off needs four weeks' notice, three days off needs six days. To refuse, you have to tell them at least as many days before the leave starts as the leave is long. So to refuse two weeks starting on a Monday, you have to say no at least two weeks before that Monday. Miss the deadline and your refusal doesn't stand in law, and they can take the leave anyway.

Your contract or policy can replace these defaults, and most well-drafted contracts do, usually asking for longer notice and giving you more room to refuse. Older contracts and template-built ones often don't, so it's worth checking yours.

"We're too busy" isn't enough on its own

ACAS says you can refuse a request, but you need a real business reason, and you still have to make sure the worker can take their full leave by the end of the year. "We're busy" doesn't carry it on its own.

Since 1 January 2024 this is written into UK law: you have to give each worker a fair chance to take their four weeks of statutory leave, actively encourage them to use it, and warn them if they're going to lose it at year end. Miss any of those and the leave carries over, and the carry-over keeps running until you fix the gap.

The principle comes from a 2018 European case, Max-Planck v Shimizu. The key word is "actively": you're expected to prompt staff to take their leave, not wait for them to ask. This is where it tends to go wrong in practice. You turn the same person down a few times across the year, each refusal looks fair on its own, and added up they've built a carry-over entitlement that keeps growing until you change the pattern.

When "first come, first served" gets you into trouble

Most small businesses with any rule for clashes use a version of "first come, first served." It feels fair. The Equality Act 2010 might disagree.

A rule that treats everyone the same can still be unlawful, which is what indirect discrimination means. The question is whether the rule puts a particular group at a disadvantage (say parents, women, or people of a particular religion), and if it does, whether you can show it's a fair and necessary way to run your business.

Here's how booking order runs into that. Parents are tied to school holidays. People without school-age kids can ask for the good weeks earlier and more freely. Women are still the majority of primary carers in the UK. Run the rule for a few years and parents lose out more often than non-parents, and women more often than men. That's the pattern indirect discrimination law is built to catch.

It doesn't make the rule automatically unlawful. You can defend it if it's genuinely fair and necessary, and in a small business with no real alternative you might be able to. But ACAS guidance on indirect discrimination is clear that if a rule disadvantages a group, you need a real reason for it, and "we didn't mean to" isn't one. A safer setup combines a few things: rotation across years so the same people don't lose every August, some weight given to caring responsibilities, and a written reason for every refusal. None of that is required by law, but it's what makes your decision stand up if a complaint comes in. If you're not sure your current approach does this, the Annual Leave Health Check is a short self-audit that walks you through the gaps we see catch SMEs out most often.

Walking through a real request

Say it's Monday 1 June. Someone asks for two weeks off, Monday 10 August to Friday 21 August, and your contract doesn't mention notice for holiday.

To take leave they need to give twice as much notice as the leave is long, so four weeks for a two-week request. From 1 June to 10 August is just over ten weeks, so their notice is fine.

If you want to say no, your deadline is at least as many days before the leave starts as the leave is long. For two weeks starting Monday 10 August, your latest refusal is Monday 27 July. Take no action by then and they can take the leave regardless. "We're still looking at it" doesn't count as a refusal, and a no sent on 28 July is too late.

If you do refuse in time, ACAS recommends putting it in writing, giving the reason, and offering an alternative fortnight if you can. None of that is in the regulations, but it's what keeps the decision standing if it ends up in front of a tribunal alongside a discrimination claim.

Carry-over: when unused leave doesn't expire

The general rule is that the four weeks of statutory leave under regulation 13 can't be carried into next year. The exceptions are what most SMEs miss. Since 2024, you have to allow carry-over of unused leave where a worker couldn't take it because:

• they were on family-related leave (maternity, paternity, adoption, shared parental, parental, parental bereavement, or neonatal care);
• they were on long-term sick leave (here the carry-over has to be used within 18 months of the end of the leave year); or
• you didn't recognise their right to leave, didn't give them a fair chance to take it, didn't encourage them to use it, or didn't warn them they'd lose it.

The third one is the one most SMEs underestimate. If the carry-over is down to you not doing your bit, you don't get a choice: the leave carries over automatically, and keeps carrying over until you put it right.

"Actively encouraging" means a few specific things in practice. Tell each worker, in writing, how much leave they have left at sensible points in the year. Remind them part-way through that untaken leave will be lost. Set up something that prompts them, instead of waiting for them to ask. As a Breathe partner we'd point you at its leave reports for this: a monthly or quarterly report showing each person's remaining balance makes the reminder easy to send. A small employer who doesn't track leave, says no when things are busy, and writes off whatever's left at year end isn't following the rules.

Bank holidays: included or extra?

A separate question that comes up every year: are bank holidays part of the 5.6 weeks, or on top? There's no legal answer. The Working Time Regulations give every worker 5.6 weeks of paid leave and say nothing about bank holidays, so it's a contractual question, and ACAS is explicit that the contract decides. A lot of SME contracts are vague: "28 days including bank holidays," "5.6 weeks plus bank holidays," or just "5.6 weeks" with nothing more. Where the contract says nothing, the usual reading is that the 5.6 weeks is the lot and bank holidays come out of it, but that's shaky ground in a dispute. The fix is to make the wording clear.

What this comes down to

Read your contracts and check what they say about notice for holiday. If they're silent, the statutory defaults apply, and they probably don't suit how you run. Decide how you'll handle clashes, write the rule down, and apply it consistently, because "first come, first served" on its own isn't a finished policy. Record the reason for every refusal and keep the running record, since refused holiday is exactly the sort of thing that turns into a grievance.

And make sure you can say, at short notice, how much leave each person has left, and that you've prompted them to use it during the year. The duty to encourage is on you, not on them. If you'd rather not piece all this together yourself, that's what our HR Oxygen service is for: we handle the policy, the paperwork, and the difficult conversations as an ongoing relationship.