Banked leave illustration

What is Banked Leave?

Banked leave is when an employee stores up annual leave from multiple years to put towards a larger time off work in the future.

The employee would sacrifice part of their allowance in the current year to store (bank) this allowance instead. They may do this for a few years before cashing in the stored (banked) allowance for a longer time off work.

Banked leave allows employees to save up part of their annual leave over multiple years for an extended period off work in the future.

Employees may choose to bank leave to save up for:

  • Travelling
  • Seeing family oversees
  • Personal development
  • Charity projects

Banked annual leave policies are normally applied like:

  1. A new annual leave year starts on the 1st Jan
  2. Employees can apply to bank annual leave in the current leave year
  3. Requests are approved/rejected by the employee's manager and or HR
  4. If approved the requested number of days is removed from the employee's allowance for the current year and recorded as 'banked leave' instead for use in the future.

In some cases the employee may need to have their whole plan of how they will spend the annual leave approved beforehand.

This would include how many days they plan on banking, for how many years and when they plan to use said banked days in the future.

Mary in Australia

Example of using banked leave

Mary wants to do a big trip to Australia in the next 3 years but doesn't want to wipe out her whole annual leave allowance in year to do so.

Her company allows her to bank 5 days annual leave pear year.

Therefore Mary doesn't use 5 days of her annual leave each year and banks it instead. After the 3 years she has 15 days annual leave banked.

Mary can now use those banked holidays plus 5 days annual leave from the current years allowance to spend a whole month in Australia.

Typical banked leave policy

Companies that have a banked leave policy will generally allow around 5 days per year to be banked.

A limit to the number of years you can bank leave over is sometimes also specified. This can be 5 or 10 years generally.

Alternatively a limit may be placed on the maximum number of days that can be banked. e.g. may bank a maximum of 25 days

Regulations to consider

The employer may want to ensure that year's annual leave entitlement does not reduce to less than the minimum required by any regulations due to the sacrificed days for banked leave.

Such regulations will vary from country to country.

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