HOLIDAY PAY
Calculating Holiday pay can be an absolute minefield but you need to get it right!
Here is a simplified guide for you, but it is a complex area and if you are in any doubt then you should seek legal advice.
THE LEGAL MINIMUM
Under the Working Time Regulations 1998 (as amended), workers (including part-timers and most agency and freelance workers) have the right to:
- 5.6 weeks’ paid leave each year (from 1 April 2009)
- payment for untaken statutory leave entitlement on termination of employment
Paid public holidays can be counted as part of the statutory entitlement unless this is expressly covered in the contract.
BUILDING UP LEAVE
Under the Working Time Regulations, employers can use an accrual system to calculate how much leave a worker has built up during their first year of employment. Under such an accrual system, leave is built up monthly in advance at the rate of one twelfth of the annual entitlement.
For example, a full-time worker in the eighth month of employment would have built up 18.6 days’ leave. This calculation is based on annual entitlement of 28 days x 8/12ths = 18.6.
CARRYING OVER LEAVE
From 1 October 2007 any holiday entitlement over four weeks (20 days for a five-day week, 16 days for a four-day week etc.) may with agreement be carried over into the following leave year
Rolled-up holiday pay Employers should pay their employees at the time they take their leave. They should not use any form of ‘rolled-up pay’, where holiday pay is staggered over the rest of the year.
How is a part-time worker’s holiday entitlement calculated?
Part-time workers are entitled to the same holidays as full-time workers, calculated on a pro-rata basis. For example, an employee who works three days a week is entitled to 16.8 days’ paid holiday – their normal working week multiplied by 5.6. An employee who works four days a week is entitled to 22.4 days’ paid holiday- their normal working week multiplied by 5.6.
What leave do casual workers get?
If a member of staff works on a casual basis or very irregular hours, it is often easiest to calculate holiday entitlement that accrues as hours are worked.
The holiday entitlement of 5.6 weeks is equivalent to 12.07 per cent of hours worked over a year.
The 12.07 per cent figure is 5.6 weeks’ holiday, divided by 46.4 weeks (being 52 weeks – 5.6 weeks). The 5.6 weeks are excluded from the calculation as the worker would not be at work during those 5.6 weeks in order to accrue annual leave.
So just multiple the staff hours of a period by 12.07% and this will give you the hours of Holiday Pay which can be paid
Does leave accrue during periods of absence?
In many cases, as long as a contract exists between the employer and the worker, the statutory minimum entitlement to paid holiday will continue to accrue during periods of absence, such as ordinary and additional maternity
Maternity leave
Many employers allow women to add on all of their annual leave to the beginning or end of their maternity leave. Any arrangements should be agreed following discussion between an employer and a pregnant employee and put in writing.
A quick guide to calculating holiday entitlement
| Working Pattern | Before 1 April 2009 | After 1 April 2009 |
| Full-time (5 day week) | 4.8 weeks (24 days) | 5.6 weeks (28 days) |
| Part-time (4 day week) | 4.8 weeks (19.2 days) | 5.6 weeks (22.4 days) |
| Part-time (3 day week) | 4.8 weeks (14.4 days) | 5.6 weeks (16.8 days) |
| 6 day week | 4.8 weeks (28 days – the maximum statutory entitlement) | 5.6 weeks (28 days – the maximum statutory entitlement) |
| Compressed hours eg 36 hours in 4 days | 36 hours x 4.8 weeks = 172.8 hours per year | 36 hours x 5.6 weeks = 201. 6 hours per year |
| Annualised hours eg 1,600 hours at an average of 33.5 hours week | 33.5 hours x 4.8 weeks= 160.8 hours per year | 33.5 hours x 5.6 weeks = 187.6 hours per year |
| Bank Holidays | Can be included in the 4.8 weeks leave – check your contract | Can be included in the 5.6 weeks leave – check your contract |
I hope that this has helped you and if you have any problems with your leave and payroll, please contact us at Quickpaye for our help!