How to create an accrued leave policy

Learn how to set up accrued leave policies and apply them to your employees or groups with this step-by-step guide.

Saad Saeed avatar
Written by Saad Saeed
Updated today

🎯 For admins looking to set up accrued leave.

  • Disclaimer: It is your responsibility to ensure compliance with the relevant rules for leave and to configure Planday to be suitable for the particular circumstances of your organisation and employees. If you are unsure, please obtain professional legal advice.

  • Get to know Planday's leave management to find out which leave set-up fits your needs.

  • Are you an employee? See How to apply for leave.

The UK government introduced a new Holiday entitlement reform for irregular and part-year workers that came into effect on 1 April 2024.

If you are in the UK, consider taking the optional steps outlined in Preparing for the 2024 UK Leave Reform to ensure a smoother transition to the new calculation method.

In Planday's leave setup, you can manage your employees' time off by setting up leave policies. A policy is a set of rules that determines accrual, pay, duration of leave etc. Apply these policies to your employees by creating individual leave accounts for them, enabling you to record their leave accurately.

What is an accrued leave policy?

With an accrued leave policy, employees earn leave on an ongoing basis by how much they work or accrue a balance periodically every month instead of having a fixed balance.

Accrued leave is a holiday allowance where the number of days or hours are earned over time instead of a fixed number of days. In some cases, an opening balance of days can be used. Employees deduct their leave from an account based on this accruing policy. Most accrued leave builds up leave based on an earning rate the local government regulates following labour laws. The account is reset after a period with options to carry over unused time.

Create an accrued leave policy

Go to Settings > Leave & Overtime (or Absence, Overtime, Vacation) > Policies > press the Create policy button. screenshot.001.png

If Planday offers leave suggestions for your region, you'll see a selection of predefined policies based on common scenarios and recommendations based on local labour rules.

  • Choose from one of the suggested policies (if available) or click "Create a custom policy" to set up your own rules.

If no suggestions are available for your region, you will be asked to select a type of policy you want to create.

  • Choose Leave policy (or Absence policy) screenshot.001.png

Step 1 of 3 — Set name and period

You'll be guided through three steps to establish a set of rules for your custom leave policy. screenshot.001.png

Policy details

  • Name: Choose a name for your leave policy, such as "Accrued Leave" or "Holidays" It's recommended to use names without years for reusability.

  • Description: This is an optional field where you can add a description for the policy.

Accruing period

  • Accruing period: Start Date: This is the date when the leave starts accruing. Choose a date for the account to begin accruing leave.

  • Accruing period: Duration: Set the duration for how many months the accruing period should typically last, usually 12 months.

  • Renew automatically: It's recommended that you select this option. If unchecked, the account won't renew automatically, and you'll need to manually create new accounts each year.

Spending period

  • Spending period - Start date: The spending period is when the employee is eligible to spend their earned leave. This can be set as the same date the accruing period starts.

  • Spending period - Duration: Set a deadline for how many months the employees should be able to spend their leave (1-52 months).

Once you've configured your desired settings, click Next.

Step 2 of 3 — Set opening balance, accrual rate, requirements for accrual and applicable Shift types screenshot.001.png

Accrual policy

  • Accruing in: Select days or hours as your opening balance. This cannot be changed once the policy is created.

  • Opening balance: In this field, enter the value of days or hours per year. You have the flexibility to change this value for each specific employee by editing their leave account. The opening balance mentioned here will be the initial balance visible on each employee's leave account at the beginning of a new spending period.

  • Accruing rate:

    • For Days choose between “Percentage”, “Days per month” or “Days per year”.

    • For Hours choose between “Percentage”, “Hours per day” or “Hours per month”.

    • For Days or Hours per day/month/year: enter the number that fits your country.

    • For Percentage, here are some commonly used rates:

      • 12,07 % rate calculated based on days/hours worked and amounts to 28 days per year.

      • 12,55 % rate calculated based on days/hours worked and amounts to 29 days per year.

      • 13,04 % rate calculated based on days/hours worked and amounts to 30 days per year.

      • 13,54 % rate calculated based on days/hours worked and amounts to 31 days per year.

      • 14,04 % rate calculated based on days/hours worked and amounts to 32 days per year.

      • 14,54 % rate calculated based on days/hours worked and amounts to 33 days per year.

    • Average working week (Calendar week method): Read more in the article What is the Calendar Week Method.

    • UK Customers: Use this handy tool from Gov.UK to calculate various holiday entitlements.

  • Max allowance / CAP: Choose between “Days per Month”, “Days per Year”, “Hours per Day” or “Hours per month“ and enter the maximum allowed earnings per the period you have chosen. Leave blank for unlimited.

  • Requirements for accrual: (only available if the account has an accrual rate per day/month/year.) Choose if the requirements for accrual should always accrue, or depend on approved shifts in the schedule.

  • Monetary payout: Choose if the payout of vacation should be based on an average of 12, 13 or 52 weeks, or set a fixed rate. Select Do not use if this does not apply to your policy.

  • Shift types: Select the applicable shift types that should count towards the accrual. These can be normal shifts, overtime and may exclude sick days or no-shows depending on your company’s policies.

Once you've configured your desired settings, click Next.

Step 3 of 3 — Additional policy rules

  • Employee types, Departments, and Employee groups: Use these options to control which employees can use the specific leave policy you're creating. For instance, if you only want leave available for a specific department, you can limit access with this option.

  • Create automatically: When selected, the system automatically applies this leave policy to all new and existing employees matching the selected options and creates leave accounts for them.

⬆️ Note: Be mindful of the allocations you set up here. The accruing rate, accruing period, and spending period will automatically apply to matching employees. However, you can edit these manually per employee if needed by editing their leave account under Schedule > Leave accounts.

  • Negative balance: Check this box if employees should be able to request more days/hours than their existing balance. If unchecked, the account won't allow a negative value. For example, if an employee has a balance of 5 days and requests 7 days off, the policy won't allow it.

  • Consecutive leave days (or Consecutive absence days): Set a restriction on the number of consecutive days off. You can choose Unlimited or set a fixed limit. If unlimited is selected, you can still approve or reject extended leave as a manager for each request.

  • Carry over: Allows you to transfer unused days to the next period. The policy creates a new leave account called “Carry over” at the end of the consumption period. If Allow carry-over for the next period is selected, specify the maximum days/hours that can be transferred and if they must have a different/fixed holding period.

Read more

This point closely relates to the Spending period (see step 1 of 3).
For example, If your Spending period starts in 1 April and lasts 12 months, employees will be able to use their 2023 leave entitlement from 1/4/2023 until 31/3/2024. With carryover set to max 5 days and limited till 30 June, employees will carryover their leftover balance (at most 5 days) on 31/3/2024 to their carryover account and will be able to use it until 30/6/2024.

  • Payroll: Set up a Salary code for this leave policy based on your payroll reports to display detailed information on leaves and help Payroll integrations understand the reported leave type.

  • Account priority: Adjust if you have multiple leave accounts and want employees to use one before another.

  • Bank holiday calendar (or Public holiday calendar): Link a holiday calendar to the leave policy so public holidays don't count towards leave balances. For example, if an employee requests time off from Monday to Friday (5 days) and Tuesday is a bank holiday, the suggested cost will be 4 days instead of 5 days.

  • Default Shift type for overlapping shifts: Choose a shift type you would like to apply to existing shifts scheduled during the employee's requested time off. Typically a shift type used to mark employee's absence.

Remember to press Save to create your leave policy.

See related articles:

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Urlaub, ferie, semester, abse, absen, vaca, vacat, ferien, How to set up accrued Absence accounts, Set up Accrued absence account template

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