Holiday entitlement and calculating pay explained


holiday calculations and entitlementBank holiday entitlement and holiday related pay questions are always hot on the lips at this time of year.

But don’t rack your brains worrying whether you are under paying your employees or fret whether you are over indulging your staff with ‘free’ days off

Here is a very quick guide to holiday entitlement just in time for the holiday rush.


 FREE HOLIDAY PAY CALCULATING TRAINING WORKSHOP – 5th JULY 2017 in BRISTOL

What is a Bank Holiday?

Historically, a bank holiday was a date in the calendar year that banks chose not to open for business.  Typically, because banks closed for the day, other businesses could not trade and therefore they closed for the day too.

What is a Public Holiday?

A public holiday is a date in the calendar year that may have a religious or civil correlation such as Christmas Day and a Royal Wedding.

Want to know more history then read our 10 Bank Holiday Facts


 

How much holiday are employees entitled to?

Almost all workers are legally entitled to 5.6 weeks paid holiday per year (known as statutory leave entitlement or annual leave). Remember, an employer can include bank holidays as part of statutory annual leave.

For example: An employee working 5 days per week will be entitled to statutory 28 days.  Any days taken as leave that happen to fall on a ‘bank holiday’ will be deducted from the employee’s holiday entitlement.

If an employer decides to give the bank holidays as extra paid holiday entitlement ( statutory + bank holiday pay) that is at their discretion and as such should be included in their terms and conditions of employment.

Self-employed workers are not entitled to paid annual leave. But of course they may take holiday!

Check out our holiday calculation table


 

Holiday entitlement for full time staff?

Most workers who work a 5-day week, must receive 28 days paid annual leave per year. This is calculated by multiplying a normal week (5 days) by the annual entitlement of 5.6 weeks.

Check out our holiday calculation table

Holiday entitlement for part-time workers?

No matter the working pattern, a worker should still receive holiday pay based on a ‘week’s normal remuneration’. This usually means their weekly wage but may include guaranteed/ non guaranteed overtime, travel expenses, commission, allowances or similar payments.

Part-time workers are also entitled to a pro rata equivalent of 5.6 weeks of paid holiday each year, although this may amount to fewer actual days of paid holiday than a full-time worker would get.

Example 1
An employee works 3 days a week, their leave is calculated by multiplying 3 by 5.6 which comes to 16.8 days of annual paid leave.  An employer must always round up holidays to the nearest convenient time period.

Example 2

An employee works 28 hours a week.  Their working days are differing lengths, but they always work 28 hours.   This employee will be enititled to:

28 hours x 5.6 weeks = 156.8 hours per year.

Check out our holiday calculation table

Holiday entitlement if working irregular (ad-hoc) hours?

People working irregular hours are also entitled to paid holiday leave.  However, their holiday entitlement may be calculated for each hour worked (‘accrued’).  The percentage used for the statutory minimum (28 days) is 12.07%.

The holiday entitlement of 5.6 weeks is equivalent to 12.07 per cent of hours worked. The 12.07 per cent figure is 5.6 weeks’ holiday, divided by 46.4 weeks (being 52 weeks – 5.6 weeks) multiplied by 100 = 12.07 per cent.

The 5.6 weeks have to be excluded from the calculation as you would not be present during the 5.6 weeks in order to accumulate annual leave.  However, holiday is accrued on overtime.

For example:

An employee works ad-hoc hours over varying weeks; for each hour worked they accrue holiday at 12.07%.  The employee never takes time off work for holiday (for example students working the summer holiday).  This pay can be accrued over the weeks/months until they wish to take their holiday or leave the business when their ‘accrued pay and entitlement’ should then be given.

Generally speaking accrued holiday pay should be paid to an employee on their request not when an employer wishes to pay it.  But there are instances when employers wish to pay accrued holiday every paycycle.

The 12.07% calculation is a particularly useful method if your employees take their holiday on ‘non-working days’ such as those who work part-time, shift, term time or completely random.

Note:  If an employee works guaranteed overtime, or is contracted to work non-guaranteed overtime, commission makes up their salary, receives a regular bonus, or has travel time included etc –  this must also be paid when they are on holiday. Please see new ruling here>>. 

Check out our holiday calculation table

Limits on statutory leave

Watch those pennies! Statutory paid holiday entitlement is a maximum of 28 days. Staff working 6 days a week are only entitled to 28 days’ paid holiday and not 33.6 days (5.6 multiplied by 6).  This should however not affect the pay they receive while on holiday – see above.

Bank holidays

Remember,  bank or public holidays do not have to be given as extra paid leave.

An employer can choose to include bank holidays as part of a worker’s statutory annual leave.

  • There is no legal right to paid public holidays.

Extra leave

An employer can choose to offer more leave than the legal minimum. They don’t have to apply all the rules that apply to statutory leave to the extra leave. For example, a worker might need to be employed for a certain amount of time before they become entitled to it.

If you are in doubt use this statutory leave calculator to work out a worker’s leave.

Other aspects of holiday entitlement

Workers have the right to:

  • get paid for leave
  • build up (‘accrue’) holiday entitlement during maternity, paternity and adoption leave
  • build up holiday entitlement while off work sick
  • choose to take holiday at the same time as sick leave

Disputes

Paid annual leave is a legal right that an employer must provide.  For further advice contact ACAS

Still confused?? Are you bogged down with holiday calculations? Would you like someone to monitor your employees’ holiday entitlement?  Then contact us and discuss the benefits of payroll outsourcing.


 

Why not request a no obligation quote for payroll/holiday & auto enrolment processing?

 

Email  tracy@payrollsolutionsltd.co.uk or call 0117 9323444

 

Don’t forget to keep up to date with our payroll processing calendars here >> or check out our holiday calculation table

Happy holidays!

Tracy