Statutory Leave and Holiday Accruals: Compliance Guide

Paid annual leave is a core legal right for employees worldwide. Yet holiday accruals remain one of the most misunderstood and inconsistently managed obligations in global employment.

As a Global Employer of Record (EOR), Acumen regularly receives questions from clients who are unclear about how these entitlements are calculated, funded, and settled, especially when payroll is managed across multiple countries with different rules.

The stakes are high: errors in holiday accruals can result in hidden costs, regulatory penalties, or compliance gaps that only become visible at the point of contract termination or during audits. Many clients discover liabilities too late, because their previous provider failed to apply local rules correctly, or because assumptions from their home country payroll did not translate internationally.

This guide sets out how holiday accruals actually work, why the rules vary, and how Acumen’s approach is designed to make obligations fully transparent and compliant from the outset. It is intended for experienced employers and finance teams managing global workforces, who need clarity, cost predictability, and confidence in their statutory compliance.

What Are Holiday Accruals?

Holiday accruals are a legal and financial obligation for employers to provide paid annual leave, calculated and recognised over the period an employee works.

In practice, this means that for each pay cycle, employers must set aside a specific amount to fund the statutory or contractual leave employees are entitled to receive, regardless of when the leave is actually taken.

The method for accruing, recognising, and settling holiday pay varies by country. Some jurisdictions require accruals to be tracked and reported monthly, with unused leave paid out at contract termination. Others may allow forfeiture of unused days, or apply different rules for accrual and payout.

For international employers, understanding and applying the correct accrual method is essential to avoid compliance failures, disputes, or unbudgeted liabilities, particularly when operating across multiple jurisdictions and legal systems.

Why Rules Differ Internationally

There is no universal approach to holiday accruals. Each country defines its own statutory leave entitlements, accrual methods, and payout requirements, shaped by local labour law, regulatory practice, and market expectations.

For many employers entering new markets, these differences are not immediately obvious. Employers often expect that their home country approach, whether that’s “accrue as you go,” “grant annually,” or “use it or lose it”, will be acceptable everywhere. In reality, applying a single model across borders is likely to result in errors, missed liabilities, or compliance failures.

Key areas of difference include:

• Accrual Methods: Some countries require leave to be accrued monthly and recognised as a financial liability; others grant leave as an annual entitlement, or use entirely different systems.
• Payout on Termination: In many jurisdictions, unused statutory leave must be compensated at exit; in others, unused days may be forfeited or carried forward, depending on law or contract.
• Carry-Forward and Forfeiture: Whether and how unused leave can be carried into the next year or forfeited differs significantly and can trip up employers used to more flexible or more rigid home country practices.
• Contractual vs Statutory Practice: In some markets, contractual terms may exceed statutory minimums, requiring a separate approach to accruals for statutory and non-statutory leave.

For international employers, these differences mean that simply extending a home country payroll policy is rarely sufficient. Getting it wrong can mean regulatory breaches, disputes, or unbudgeted payouts.

Core Models: How Different Countries Handle Holiday Accruals

Countries use several distinct models to regulate holiday accruals. Understanding these models and knowing which countries use them enables employers to anticipate risk and cost, and to structure compliant payroll practices in each location.

1. Statutory Accrual with Mandatory Payout

Typical in the UK, Germany, Croatia, France, and and other jurisdictions.
Leave entitlement is granted for a fixed period (calendar or fiscal year). Unused leave may be forfeited if not taken within that period, unless contract or law requires otherwise.

Example: In many US states, employers can enforce “use it or lose it” policies for non-statutory vacation unless state law requires payout at termination.

2. Carry-Forward with Expiry

As applied in the UK, Germany, Croatia, France, among others.
Unused leave can be carried over to the next year, but only under strict limits or specific conditions (such as illness or maternity). Leave that is not used within the allowed carry-forward period typically lapses.

Example: In Germany, statutory leave may be carried over until 31 March of the following year if unused for valid reasons; after that, it expires.

3. Contractual or Discretionary Models

Common approach in countries such as. Canada, UAE, hybrid-policy markets.
Statutory minimums are mandated by law, but employers may provide more generous entitlements by contract. Accrual, carry-forward, and payout for any additional (non-statutory) leave is usually defined by company policy.

Example: In Canada, statutory leave must be accrued and paid out at termination; any additional days above the statutory minimum may be subject to the employer’s internal rules.

For each model, failure to apply the correct local method exposes employers to claims for unpaid leave, penalties, or litigation. Recognising which system applies in each country is critical for compliance and cost control.

The following table summarises the application of these core models in key jurisdictions, providing a practical reference for statutory leave, accrual, payout obligations, and employer risk.

Key International Holiday Accruals Rules: Country Comparison

Country	Statutory Leave Entitlement	Accrual Required	Payout for Unused Days	Carry Forward Rules	Key Notes
United Kingdom	28 days (inc. public holidays)	Yes	Yes (all accrued statutory leave must be paid out at termination)	Yes, but limited: 1.6 weeks may be carried forward by agreement; additional rules for sickness or maternity	Employers may include bank holidays in 28 days or grant on top. Must track 4 weeks EU leave vs. UK additional.
Germany	20 days (5-day week), 24 days (6-day week); typically 25–30 by contract	Yes	Yes (statutory, must pay out all accrued at termination if not taken)	Yes, unused statutory leave can be carried over until 31 March if not taken for valid reasons (e.g., illness); otherwise, lapses	Contractual entitlements often exceed statutory minimum.
Singapore	7–14 days (rises with service)	Yes	Not universally required; many employers pay out on termination, but only mandatory for employees under Part IV of the Employment Act	Yes: statutory leave must be carried forward for 12 months for Part IV employees; beyond that, forfeiture/encashment per contract	Forfeiture applies mainly to leave above statutory minimum or after carry-forward period.
US	None (federal law); policy-driven	No (federal); policy-based	No statutory right (depends on policy/contract; some states require payout)	Policy-based: “use it or lose it” allowed in many states for non-statutory leave	State law may mandate payout for accrued leave; always check state/local rules.
UAE	30 calendar days	Yes	Yes (statutory; all unused leave must be paid out at exit/termination)	Limited: some employers allow carry forward, but statutory entitlement must be paid at exit	Payout mandatory at termination, regardless of policy.
Canada	2–4 weeks (10–20 days; province-dependent, increases with service)	Yes	Yes (unused statutory vacation pay must be paid out at termination; vacation time may be lost if not taken, varies by province)	Yes, but limited: statutory leave cannot be “use it or lose it”, but additional days may be	Each province/territory has unique rules on timing, carry-over, and payout.
France	25 working days (or 30 “working days”/6-day week); accrues at 2.5 days/month	Yes	Yes (all untaken statutory leave must be paid at termination)	Strict: generally lost at end of reference period unless deferred for illness/accident (15-month deferral allowed), or by collective agreement	Reference period June–May. Collective agreements may modify.

The Risk of Getting It Wrong

Mismanaging holiday accruals is a common and costly mistake in international employment. The risks are not limited to payroll errors—they can include:

• Unexpected financial liabilities: Failure to accrue or pay out statutory holiday can result in unplanned costs at termination, especially if employment ends mid-year or during a restructuring.
• Compliance breaches: Incorrect application of local law may trigger fines, regulatory penalties, or government audits, particularly in strict jurisdictions.
• Employee disputes: Unpaid or miscalculated holiday entitlements are a frequent source of grievances and litigation, especially with senior or highly mobile staff.
• Reputational risk: Non-compliance can damage an employer’s credibility with current and future employees, as well as with regulators and business partners.

Employers that apply their home country logic in new jurisdictions, or rely on payroll systems that don’t recognise local nuances, are especially vulnerable. Liability may only become apparent at the point of contract exit, audit, or acquisition, when it is too late to fix without cost or exposure.

A robust, country-specific approach to holiday accruals is essential for controlling risk, protecting budget, and ensuring full compliance.

How Acumen International Manages Holiday Accruals

As a Global Employer of Record, Acumen International applies a country-specific approach to holiday accruals for every employee engaged through our Global Employer of Record service. This process is designed to ensure compliant handling of paid leave liabilities, cost transparency, and risk control for international employers.

Key elements of Acumen’s approach:

• Local law as baseline: Statutory holiday entitlement and accrual method are determined according to the employee’s country of work. Any contractual leave above the minimum is tracked according to client policy.
• Accrual and reporting: Holiday pay obligations are accrued and monitored over the course of employment. Accruals are reflected in client documentation and, where relevant, invoicing, supporting cost forecasting and compliance.
• Leave usage and settlement: When holiday is taken, or at contract termination, any accrued entitlements are calculated and settled in line with local law. This helps prevent double-charging and ensures statutory obligations are met.
• Clear client communication: Acumen provides employers with country-specific information on how holiday accruals are calculated, tracked, and resolved at exit, so that clients can plan and budget accordingly.

This approach helps clients manage their holiday pay liabilities accurately across all countries, supporting HR compliance and reducing the risk of unplanned costs.

Holiday Accruals Planning with Global Payroll Calculator

The Global Payroll Calculator (GPC) enables employers to identify and plan for statutory holiday accruals and related obligations such as 13th and 14th month salaries in every country where they operate. GPC consolidates up-to-date statutory leave entitlements, mandatory bonus salaries, and associated costs into a single employment cost calculation for each location.

With Global Payroll Calculator, employers can:

• Instantly see the statutory holiday entitlement, as well as requirements for 13th/14th month salary or other mandatory bonuses, for any country, removing ambiguity from cross-border hiring and budgeting.
• Identify the full monetary value of required accruals (holiday pay, statutory bonuses), integrated into the total employment cost projection.
• Access compliance notes explaining country-specific accrual rules, carry-forward options, payout obligations, and the timing of additional payments such as 13th/14th salary.
• Compare leave and bonus-related costs and liabilities across jurisdictions before making hiring or expansion decisions.

This enables accurate budgeting, reduces the risk of hidden liabilities, and ensures that employment costs reflect real statutory obligations, including leave and bonus accruals, in 190+ countries.