Manage the annual leave entitlement of a departing employee

Key points

• On termination of employment, an employee is entitled to be paid in lieu of any untaken statutory annual leave accrued up to the date of termination.
• In the absence of a relevant agreement between the employer and the employee that provides otherwise, payment in lieu of unused statutory annual leave on termination must be calculated in accordance with a prescribed formula.
• The employer should ensure that any unused contractual leave in excess of the statutory minimum is dealt with in accordance with the contract.
• If the employee has taken more annual leave than they have accrued during the leave year, the employer can ask the employee to repay the overpaid holiday pay, or in certain circumstances can deduct the overpayment from the employee's final salary payment.

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