Carrying over and buying leave in Ireland
Reviewed by Mellow Editorial Team, HR & payroll content team
Carrying over unused annual leave and buying or selling extra days are both legal in Ireland — but each comes with specific rules under the Organisation of Working Time Act 1997 that employers need to understand before setting a policy.
The statutory baseline
Every employee in Ireland is entitled to four working weeks of paid annual leave per leave year. That is the statutory minimum under the Organisation of Working Time Act 1997. You can offer more, but you cannot offer less.
The leave year runs from 1 April to 31 March. Some employers use a calendar year (1 January to 31 December) or a different 12-month period, which is permitted — but whatever period you choose, it needs to be clearly set out in the employment contract or staff handbook.
Carrying over leave: what the law says
The default position under the Act is that annual leave should be taken within the leave year in which it is earned. However, the Act does allow leave to be carried forward, within limits.
Leave can be carried over into the first six months of the following leave year if:
- the employee was unable to take it because of illness or injury, or
- the employer and employee agree to it.
That second point — employer and employee agreement — gives businesses some flexibility, but it does not give employers a free hand to simply refuse to let leave be taken and then let it expire. Preventing an employee from taking their statutory leave, and then refusing to carry it over, could expose you to a complaint under the Act.
Sick leave and carry-over deserves particular attention. Following EU case law that has influenced Irish practice, employees who are on long-term sick leave have the right to carry over untaken leave. In practice, this means you should track leave carefully when someone is absent on medical grounds and ensure they are not simply losing it at year end.
The key practical point: carry-over does not automatically extend indefinitely. Once the carry-over window passes without the leave being taken, the employee may have a claim for payment in lieu of untaken leave on termination, even if they never formally raised it during employment.
What happens when employment ends
On termination — for any reason, including resignation, redundancy or dismissal — any outstanding statutory annual leave must be paid out as pay in lieu. You calculate this using the employee's normal weekly pay. This is not optional, and it applies regardless of whether the employee is leaving on good terms.
This is one of the more common payroll errors employers make: treating untaken leave as simply expiring at the end of employment rather than as a liability to be settled at the final payment.
Buying and selling leave
There is no statutory right for employees to buy or sell annual leave in Ireland. However, employers can introduce a voluntary leave purchase scheme as part of their benefits offering.
A typical scheme allows employees to buy a fixed number of extra days — commonly up to five — each year, with the cost spread across their salary through regular deductions. The deductions are taken from gross pay, so the employee pays from pre-tax income, which reduces the net cost to them slightly.
Revenue has guidance on how these schemes should be structured, and the tax treatment depends on whether the scheme qualifies as a salary sacrifice arrangement. As a general rule, the deduction reduces the employee's taxable pay for income tax (at 20% or 40% depending on their income band) and USC purposes, but PRSI treatment can differ, so it is worth taking advice or checking the current Revenue guidance before you launch a scheme.
Selling leave — allowing employees to cash in days they have accrued above the statutory minimum — is also possible but must be handled carefully. You cannot allow employees to sell their four-week statutory entitlement; that floor must be taken as actual leave. Any buy-back scheme can only apply to contractual leave above that minimum.
Running a fair and legally sound policy
A few practical points if you are writing or reviewing your leave policy:
Document carry-over terms clearly. State how many days can be carried over, by when they must be used, and what happens if they are not.
Track leave properly throughout the year. If you are using payroll software or an HR system, ensure it flags leave balances rather than just logging days taken. Untaken leave is a liability, and it should be visible.
Do not make carry-over contingent on manager approval for sick leave cases. Where illness is the reason leave went untaken, the employee's right to carry over is not subject to managerial discretion.
Apply schemes consistently. If you offer a leave purchase scheme, make sure the terms are applied equally across your workforce and are clearly explained in writing before the scheme year begins.
---
Run HR and payroll in Ireland with Mellow
Mellow brings HR, payroll and 12 AI agents into one platform — built to handle Ireland properly, with payroll included, from £4 per employee per month. The AI agents don't just answer questions; they generate contracts, run cost estimates and draft letters for you.
[Start a free trial →](/register)