Benefits & Comp • 9 MIN READ
4 Annual Leave Policy Examples HR Pros Need to Know
MAY 28, 2026
Your annual leave policy shapes how employees experience their time off. Here are four common models, with the pros and cons of each.
Model 1: Standard fixed entitlement
The most common model: every employee receives the same annual leave entitlement, typically 25 to 30 days plus bank holidays, regardless of role or tenure. Simple to administer and easy for employees to understand. The risk is that it may feel undifferentiated: a high performer with 10 years of service receives the same as a new joiner. Some organisations address this by adding service-linked increments of one or two days per year of service, up to a maximum.
Model 2: Flexible leave bank
A flexible leave bank combines annual leave and bank holidays into a single entitlement that employees use as they choose. Instead of receiving 25 days plus 8 bank holidays separately, employees receive 33 days to allocate as they wish. This model is more inclusive: employees who do not observe UK bank holidays can take leave on the days that matter to them. Implementation requires a clear policy on how the leave bank is communicated and tracked, and how peak-period restrictions are managed.
Model 3: Buy and sell schemes
A buy-and-sell scheme allows employees to purchase up to a set number of additional leave days or sell unused days back to the employer, with the cost or benefit processed through payroll. Typically capped at 5 days in each direction. This model gives employees more control over their work-life balance without increasing the base cost to the employer. It must be implemented via a salary sacrifice arrangement to be tax-efficient and requires clear communication of the deadlines for making elections.
Model 4: Unlimited annual leave
Unlimited leave policies, popularised by technology companies, remove the prescribed entitlement and trust employees to take the time they need. In practice, outcomes are mixed. Without a minimum, some employees take less leave than under a fixed policy due to social pressure or uncertainty about what is acceptable. If you adopt unlimited leave, set a minimum expectation (for example, at least 20 days per year), ensure managers model taking leave themselves, and monitor leave-taking data to ensure no one is consistently underusing the benefit.
