How to calculate employee holiday entitlement

All employees are entitled to a statutory minimum annual leave. This may seem quite straightforward, but due to repeated changes to legislation and differing circumstances, calculating statutory annual leave entitlements has become an increasingly confusing process for business owners.

From 1 April 2009, the statutory holiday entitlement increased – and was capped at – 5.6 weeks (28 days for those who work a five-day week). A worker is entitled to holiday from their first day of employment. The employment contract should specifically state that the entitlement is 28 days inclusive of bank holidays. If an employees contract is worded ‘20 days plus bank holidays’, then, should there be more than eight bank holidays in a specific year, an employer would be liable to pay these.

The employment contract should specifically state that the entitlement is 28 days inclusive of bank holidays. If an employees contract is worded ‘20 days plus bank holidays’, then, should there be more than eight bank holidays in a specific year, an employer would be liable to pay these.

Below we explain how to deal with these scenarios or go straight to holiday entitlement calculations.

Carrying unused holidays into the new year

At the end of your annual leave year, you may find that members of staff are left with unused holidays. Staff may want to carry over the unused holiday from the current leave year to the next. This is only allowed for any entitlement above a four-week minimum.

Outstanding holiday above four weeks can be carried over if you and the worker agree.You may offer payment in lieu of taking any remaining holiday at the end of a leave year. Currently, this is only allowed for contractual entitlement above the statutory four-week minimum.

If smaller businesses fail to keep tabs on how much leave their employees are owed, it can lead to a lot of workers taking their holidays at once, causing potentially damaging staff shortages at busy times.

Suddenly discovering that employees are owed more leave than anticipated causes major problems for small businesses, so it pays to monitor leave taken throughout the year.

Part-time Employees

For part-time employees, holiday entitlement is calculated on a pro rata basis and cannot be replaced by a payment in lieu. So if a member of staff works two days a week, they will be entitled to 11.2 days (5.6 x 2). Any unused holiday above four weeks (the first four weeks cannot be carried over) may only be carried over into the following leave year.

Maternity Leave

During maternity leave, an employee is entitled to receive any contractual benefits she would normally receive if she was at work, apart from remuneration.
Employees on maternity leave retain their entitlement to statutory holiday throughout ordinary and additional maternity leave. If the employee is also entitled to contractual annual leave (that is, annual leave that you provide over and above the statutory minimum) she will continue to accrue this additional contractual entitlement during OML.

Employees on maternity leave also continue to accrue contractual annual leave during AML. It is not possible for an employee to take annual leave at the same time as maternity leave. It will, however, usually be possible for an employee to use any untaken annual leave either before she starts her maternity leave, or once her maternity leave has finished.

Casual Workers

If a member of staff is a casual worker, it may be easier to calculate their entitlement by how many hours a week they work on average over the whole year.

So, if they work a total of 1,000 hours a year over 40 weeks of the year, this would be 25 hours per week.

Therefore, their holiday entitlement for the year is 5.6 weeks x 25 hours a week = 140 hours.

Rather than taking a whole day’s holiday, they should take the number of hours that they would have otherwise worked on that day.

Bank Holidays

In the UK there are typically eight bank holidays: New Year’s Day, Good Friday, Easter Monday, May Day, Spring Bank Holiday, Summer Bank Holiday, Christmas Day and Boxing Day.

However, where Christmas Day and Boxing Day dates fall on a Saturday and/or Sunday, these bank holidays will usually be reallocated.

Very rarely, extra public holidays are announced (for example for the Queen’s Diamond Jubilee), which raises the question in relation to what payments are due to people who are required to work on these days.

To pay or not to pay?

The payment of time off for public holidays depends entirely on your contractual obligations and provisions. There is no statutory entitlement to paid leave for public holidays.

But bank holidays can be counted towards a worker’s statutory 5.6 weeks’ holiday entitlement under the Working Time Regulations 1998, as long as it is paid leave. This would need to be reflected in the terms of the employee’s contract.

There is no statutory requirement for employers to pay any premium for hours worked on public holidays, however, in the absence of any clear contractual provision employers may find it difficult to obtain the co-operation of staff to work them.

Typically, the minimum requirement is to grant a day off in lieu of working bank holidays.

 

Members of the Forum can call 01565 626001 to speak to an adviser for help with calculating holiday entitlement. Not already a member? Find out more about how we can help you manage HR in your business.