To combat post-Christmas blues, most of us look to our next holiday – what are staff entitled to?
Calculating holiday leave and pay is a complex area for employers so this quick guide is a good place to start. It is based on the rules applicable to statutory holiday entitlement. If an employer provides additional contractual holiday entitlement, they may be able to apply different rules to the enhanced element of leave, although it may in practice be easier to treat all leave the same.
Calculating holiday leave
Most workers have the statutory right to 5.6 weeks’ paid holiday each year, equating to 28 days for those working five days a week. This includes any holidays taken on public/bank holidays, although there is no statutory right to time off on such days.
Part-time workers are similarly entitled to 5.6 weeks off but naturally the number of days or hours off they receive will be pro-rated based on the days and hours they work. So a worker who works 3 days a week will be entitled to 3 x 5.6 = 16.8 days per annum.
For workers who join an organisation part way through the holiday year, their entitlement is calculated on a pro-rata basis for the remainder of that year.
Workers on irregular hours or part-year contracts accrue statutory holiday leave at the end of each pay period on the basis of 12.07% of the hours that they have worked. If they are entitled to additional contractual leave, this percentage accrual will be higher.
Bank holidays
There is no statutory requirement for employers to give employees bank holidays as stand-alone time off. The Working Time Regulations 1998 (WTR) do not differentiate between bank holidays and other days so employers can include them in the overall 5.6 weeks minimum holiday entitlement. Whatever the position, it should be made clear to employees whether bank holidays are excluded or included from their holiday entitlement or indeed if they are expected to be worked like a normal working day.
Calculating holiday pay
Workers with regular hours
Employees who work regular hours and receive a regular wage or salary will usually receive the same pay for a day of holiday as for a working day.
Workers with irregular hours and part-year workers – Holiday pay for irregular hours and part-year workers is based on their average pay over the previous 52 weeks calculated at the time the holiday is taken. If there are weeks where the employee received statutory sick pay (SSP), were on statutory leave (such as maternity leave) or received no pay at all, then the employer should omit those weeks from the calculation, and count back further as necessary to get 52 weeks of normal pay. Alternatively, for holiday years commencing on or after 01 April 2024 (i.e., applicable to employers whose holiday year commenced on 01 April 2024, or 01 January 2025) employers are permitted to operate ‘rolled up’ holiday pay, but only for irregular hours or part-year workers. This involves adding a fixed percentage uplift to pay in each pay period. For workers who are entitled only to the statutory 5.6 weeks holiday, this percentage will be 12.07%. If the worker is entitled to additional contractual holiday, the percentage will be greater. It’s important to note, however, that operating rolled up holiday pay will likely be a change to the worker’s contractual terms, so may therefore require the employee’s agreement. It’s also important to note that the employer is still required to ensure that these workers actually take their holiday, as the entitlement to statutory holiday is ultimately a health and safety issue.
Workers with irregular wages/salary
For workers who earn additional payments on top of any basic wage or salary holiday pay must include:
- Commission payments which are linked to the performance of tasks which the worker is obliged to carry out under the terms of the contract.
- Payments for professional or personal status relating to length of service, seniority or professional qualifications.
- Other payments, such as overtime payments, which have been regularly paid to the worker in the 52 weeks preceding the calculation date. Some bonuses – depending on the nature of the bonus.
This technically only applies to the first 4 weeks of the 5.6 weeks of statutory leave, but employers may find it administratively easier to treat all leave the same.
Taking holiday leave during the first year of employment
To prevent a new employee taking their entire leave entitlement during the first few weeks of employment, the amount of leave a worker may take at any time depends on the amount they have accrued for that year. Although these accrual provisions do not apply to leave in subsequent years, employers can set out rules which determine how much leave can be taken at any one time, e.g., maximum two weeks. Holiday accrues from the first day of employment at the rate of one twelfth of the 5.6 weeks for each month of employment.
Holiday leave and sickness
Where a worker falls sick during a period of holiday leave they can choose to take sick leave instead of holiday leave and then take the holiday leave at a later date, although they are not obliged to and can, if they choose, remain on holiday leave. Workers who are on a period of sickness absence are entitled to take holiday leave provided that they comply with the employer’s usual notification procedure. In such cases they will receive holiday pay rather than sick pay.
Carrying holiday leave forward
Where a worker has been unable to take leave during the holiday year due to a period of sickness absence or statutory leave (i.e., maternity, paternity, adoption, shared parental or parental) they are allowed to carry it over (although technically, in the case of leave carried over due to sickness absence, it only applies to the first 4 weeks of statutory leave). In the case of leave carried over due to sickness absence it must be taken within a period of 18 months following the end of the leave year in which it accrued, and in the case of leave carried over due to a period of statutory leave, it must be taken within a period of 12 months from the end of the leave year in which it accrued.
With regard to part-year or irregular hours workers, and outside the circumstances referred to above (i.e., during sickness or statutory leave) the employer and worker can agree to carry over statutory leave into the leave year immediately following that in which it accrued, under a relevant agreement.
This is just a whistle-stop tour of a very complex area. Further information can be found on our ‘Holiday Leave & Pay‘ factsheet which is available for free download from our website. Alternatively, if you are unsure about anything covered in this article or would like further clarification or assistance, please contact us on 01942 727200 or email enquiries@employeemanagement.co.uk for a no obligation chat.