Setup Considerations: accrual and carry-over

What this achieves

Accrual decides whether people get their leave up front or earn it through the year, and carry-over decides what happens to what they do not use. Both shape how much leave the company owes at any moment, so they are worth settling before balances exist.

Decision 1: granted up front, or accrued

Option	Description
None (granted upfront)	The whole annual allocation is available from the start of the policy year.
Monthly	The allocation is added in twelve steps through the year.
Quarterly	The allocation is added in four steps.
Annually	The allocation is added once a year.

Granting up front is simpler for everyone and is what most people expect from annual leave. It also means someone can take their full entitlement in January and leave in February, having taken leave they had not yet earned.

Accruing monthly matches entitlement to service and reduces that exposure, at the cost of an employee’s available balance being smaller than their annual allocation for most of the year — which generates questions.

Example: HC Corp UK Ltd grants annual leave up front so people can plan a summer holiday in January. It would accrue monthly instead if it wanted the balance to reflect only what had been earned.

You can override the per-period amount where a policy accrues unevenly rather than in equal steps.

Decision 2: what new joiners get

Prorate on hire reduces the first-year allocation for someone joining mid-year, with a proration method deciding how that reduction is calculated.

Without proration, someone joining in November receives a full year’s allocation for two months of service. That is a real cost and a fairness question against colleagues who worked the whole year.

Example: an employee joining HC Corp UK Ltd partway through the policy year receives a reduced first-year allocation when proration is on, and the full annual figure when it is off.

Decision 3: carry-over, and whether it expires

Option	Description
Allow carry-over	Whether unused days roll into the next policy year.
Max carry-over days	A cap on how many days may roll over.
Expiry (months)	How long carried days survive into the new year before they lapse.

These three settings together decide how much untaken leave accumulates on your books. Carry-over with no cap and no expiry is how an organization ends up owing a large, unplanned liability years later.

A cap with an expiry is the usual middle ground: people are not punished for a busy year, but a balance cannot grow indefinitely.

Example: HC Corp UK Ltd caps carry-over and sets an expiry a few months into the new year, so unused days survive long enough to be booked in the new year but do not accumulate across several.

Leave reporting includes a carry-over forecast and flags employees with critically low or unusually high unused balances, which is how you see this building before year end rather than after.

Decision 4: the policy year

The policy year is set by a year start and a fiscal start month. This decides when allocations reset, when carry-over is calculated, and what a year means in every leave report.

Align it with whatever your organization already treats as a year — the financial year is the usual answer, and matching it makes leave cost reconcile against everything else.

Decision 5: unit

Allocations can be expressed in days or in hours. Days suit salaried staff on regular schedules. Hours suit shift-based or part-time workforces where a “day” is not a consistent quantity.

Choose one deliberately per policy, because the number means nothing without it.

What is expensive to change later

Decision	Cost of changing later
Policy year and fiscal start month	Highest. It moves when every allocation resets and how carry-over is calculated.
Unit (days or hours)	High. Existing balances carry the old unit.
Accrual frequency on a live policy	Medium. Employees mid-year have accrued under the old rule.
Carry-over cap and expiry	Medium. It changes what people expected to keep, which is a communications problem as much as a configuration one.
Annual allocation	Low to medium. It applies going forward.

What happens next

Set these on the policy itself, then initialise balances. Balances are generated from the active policies, so a policy edited after balances exist does not retrospectively rewrite them — check the resulting balances rather than assuming.