Most small businesses don't have a formal leave policy. They have an understanding - a loose set of norms about how holiday requests work, who approves them, and what happens when two people want the same week off. That works fine until it doesn't.
The moment you have a dispute, a new hire who doesn't know the unwritten rules, or an employee who thinks they're entitled to something they're not, the absence of a written policy becomes a real problem.
A leave policy doesn't need to be long or legalistic. It just needs to be clear. This guide walks you through what to include, what to avoid, and how to put one together without spending a weekend on it.
Why a leave policy matters
A well-written leave policy does three things. It sets expectations before any conflict arises. It gives you something to point to if a disagreement does come up. And it signals to your team that you run a professional, fair operation - which matters more than most employers realise.
It also protects you. UK employment law sets out statutory minimums, but it doesn't tell employees exactly how your business handles requests, blackout periods, or carry-over. Your policy fills that gap.
What to include
You don't need to cover every conceivable scenario. A practical leave policy for a small business typically covers the following areas.
Annual leave entitlement
State how many days employees receive, whether that figure includes bank holidays, and how entitlement is calculated for part-time or part-year workers. The statutory minimum is 5.6 weeks (28 days for a full-time employee working a five-day week, including bank holidays), but many businesses choose to offer more.
The holiday year
Specify when your leave year starts and ends - common choices are 1 January to 31 December, or 1 April to 31 March. This matters because entitlement resets at the start of each new year, and carry-over rules depend on it.
How to request leave
Explain the process: how much notice is required (a common approach is twice the length of the leave being requested), how requests are submitted, and who approves them. The clearer this is, the fewer awkward conversations you'll have.
How requests are approved or declined
Set out the factors you'll consider - business needs, existing cover, how many people are already off - and be clear that approval is not automatic. You can decline a holiday request in the UK, provided you give as much notice as the leave requested.
Blackout periods
If there are times of year when you need all hands on deck - a busy season, a product launch, an annual audit - you can specify these in advance. Employees can then plan around them.
Bank holidays
Make clear whether bank holidays are included within annual leave entitlement or sit on top of it, and how you handle bank holidays that fall on a weekend.
Carry-over
State whether unused leave can be carried into the next holiday year, and if so, how much and for how long. The default statutory position is that annual leave cannot be carried over except in specific circumstances (long-term sickness, for example). If you allow carry-over as a policy, set a limit - carrying over unlimited leave creates a liability on your books.
Leave during notice periods
Cover what happens to unused leave when someone leaves - whether it's paid out, whether it can be taken during notice, and whether you can require it to be taken during notice.
Other types of leave
You may also want to include brief sections on sick leave, compassionate leave, and parental leave. These can be separate standalone policies, but flagging them in your main leave policy ensures employees know they exist.
Common mistakes to avoid
Being too vague. "Leave requests will be considered on a case by case basis" sounds fair, but it gives employees no information about how decisions are actually made. Vagueness invites disputes.
Copying a policy from the internet without reading it. Template policies are a useful starting point, but they need to reflect your actual practice. A policy that says one thing and a manager who does another creates confusion and erodes trust.
Never updating it. Employment law changes, your business changes, your team size changes. Review your leave policy once a year. It takes twenty minutes.
Making it too long. A policy that runs to twelve pages will not be read. Keep it focused on the things that actually come up day to day.
Putting it into practice
Writing the policy is the easy part. The harder part is making sure people actually know it exists. Share it with your whole team when it's published. Include it in new starter onboarding. If you make significant changes, communicate them explicitly rather than hoping people will notice.
And make sure whoever handles day-to-day requests - whether that's you, an office manager, or an HR contact - knows the policy well enough to apply it consistently.
The free template
To make this as easy as possible, we've put together a leave policy template you can download and adapt. It covers all of the sections above in plain English, with guidance notes to help you fill in the parts specific to your business.
Download the free leave policy template
Once you have your policy in place, the next step is making sure you're tracking leave accurately. A policy that lives in a Word document, with requests still handled over email or WhatsApp, is only half the job.
Absently is a simple leave management tool built for small UK businesses. It handles requests, approvals, and your team calendar in one place - so your leave policy isn't just a document, it's actually how your business runs. Try it free for 30 days - no credit card needed.