It is generally understood by employers that they can refuse employee requests for particular dates and time periods of annual leave and dictate when it must be taken, but can leave that has been pre-booked by agreement be cancelled and, if so, how?

If there is a good business reason for cancellation, such as a new critical deadline, increased workload or unexpected staff absences, an employer might reasonably be able to cancel pre-booked leave. It is advisable to set out in your employee’s contracts of employment the circumstances under which the cancellation of pre-booked annual leave could occur and any associated conditions.

As well as having a good business reason, it is important to consider the reasonable alternatives to cancelling leave; make sure that, in doing so, you will not be breaching Working Time Regulations and ensure that the employee does not lose any of their holiday entitlement from the cancellation, allowing for holiday days over the statutory minimum amount to roll over into the next holiday year if the employee is prevented from taking it in the current holiday year. Even if the employee could take cancelled leave at another time during the current holiday year, it could be agreed that leave could be rolled over into the next leave year. Agreement to this is at the employer’s discretion unless the employee’s contract states otherwise.

Before cancelling an employee’s annual leave, you must give notice. It is advisable to give as much notice as possible, in writing and to set out in the employee’s contract the notice to be given. In any event, the minimum notice must be the same length as the period of leave booked. Therefore, if an employee has booked a week’s leave, you must give the employee notice of cancellation at least a week before the first day of that leave.

If an employee has incurred costs relating to their holiday, it may cost them financially if you cancel their holiday. The responsibility for those costs could be covered in the employee’s contract terms or paid at the employer’s discretion. But cancellation can give rise to arguments about financial loss and, in any event, is often likely to lead to disappointment and poor morale. Therefore, employers should give careful consideration to all matters before taking such action.

What if an employer unfairly cancels an employee’s annual leave?

If you do not give proper notice, do not allow an employee to take their correct annual leave entitlement for the year or do not have a legitimate business reason for cancelling an employee’s holiday, the employee may be able to challenge the legality of your actions. Subject to surrounding circumstances, they may raise a grievance and/or bring a claim for breach of contract and/or constructive unfair dismissal if you cancel their annual leave in the incorrect manner. If you are in doubt, it is prudent to seek professional advice before taking action to cancel any annual leave.

Can an employee cancel their pre-booked annual leave? 

Unless there is a contractual entitlement, by law, employers do not have to agree to cancel pre-booked annual leave at an employee’s request. The exception is where an employee is on sickness absence and so cannot take annual leave at the same time. If that is the case, the employee should follow the employer’s sickness absence procedures and be allowed to take the annual leave missed because of sickness at another time, to ensure they keep their full entitlement.

Even without a legal entitlement or a contractual right to cancel pre-booked leave, to maintain goodwill and positive morale, where possible you should consider postponing and rebooking leave to a mutually convenient time for your business and the employee.

To summarise, employee annual leave can be cancelled by an employer where there is a legitimate business reason, it is lawful to do so, where alternatives have been considered, sufficient notice is given and the employee’s overall holiday entitlement is not prejudiced. An employee cannot generally cancel their pre-booked leave without employer agreement, unless sickness prevents them from taking annual leave or their contract states otherwise.