Can an employee take annual leave while working their notice period?

Often, the most difficult questions arise when different employment entitlements intersect. What happens if an employee on parental leave is made redundant? Does an employee away from work on workers’ compensation continue to accrue annual leave? HR Assured has recently encountered a few queries relating to taking annual leave while an employee is working their notice period, either as a result of termination or resignation.

When can annual leave be taken?

The basic principle is that annual leave can (and must) be taken with mutual agreement. Apart from certain rules relating to excessive leave balances and annual shut-downs, annual leave must generally be consented to by both the employer and employee.

This means that if both parties agree, there is no problem with employees taking annual leave as all or part of their notice period.

However, an employer cannot force an employee to take annual leave while they are serving notice. Receiving notice of termination is an employee’s legal entitlement, and this will not be satisfied if it runs concurrently with a period of leave.

Arguably, this also applies to arrangements where annual leave has been arranged before an employer initiates a termination, with the result that some or all of the notice period intersects with the pre-agreed period of annual leave. In these cases, we would recommend that the employer offers for the employee to withdraw the annual leave in recognition of the changed circumstances. If the employee is fine for the annual leave to continue, then this constitutes mutual agreement, and will be permissible.

In turn, an employer may choose to refuse an employee’s request to go on annual leave while serving their notice period if there are valid operational reasons, such as requiring the employee to engage in a proper handover of duties.

Can notice be given while on annual leave?

A number of cases suggest that notice of termination cannot be given while the employee is on annual leave, as it would reduce the employee’s right to the leave. For instance, it would mean that the employee is forced to use their annual leave to look for another job and attend interviews, and would therefore not receive the personal benefit of rest and relaxation which annual leave is intended to provide.

If you are prepared to pay out the employee in lieu of their notice period, we recommend that you wait until at least the first working day after their return from annual leave, so they are technically no longer on leave when you end their employment and pay out the remainder of the notice.

It is less clear whether an employee can provide their resignation while on annual leave – generally it is assumed to be fine, as it is the employee choosing to waive their right to the notice, and the employer will still have time to engage in a recruitment process.

Key points

If you only take one point away from this article, let it be this: annual leave must be taken by mutual agreement. Most of the other rules fall into place around this one, but it’s never a bad idea to check with a professional employment relations advisor, such as those provided by HR Assured, to ensure you’re doing the right thing.

For more information, clients should contact the HR Assured team. If you’d like more information about the benefits of becoming an HR Assured client contact us today for an informal chat.