Holiday Pay Accrual

For accounting periods commencing on or after 1st Jan 2015 companies will have to provide for holiday pay accrued by its employees but not taken before the year end. This is a requirement of the new all-encompassing accounting standard FRS 102. Provision is not required where the amount is immaterial.

The provision could be material if, say, a company draws up its accounts to 30 June but its holiday year ends on 31 December – there could be six months holiday pay to be accrued if no one has taken holidays before the year end!

It would save a lot of record keeping if your holiday year and accounting year ended on the same date.

It’s not as simple as changing the date – you need to consider whether employees can carry over untaken leave from one year to the next and whether you pay leavers for untaken holidays or not, as well as deciding when to make the change.