When you employ staff you must give them a certain amount of time off and pay them for that time. By law, you must give your staff 5.6 weeks of holiday a year – this is their statutory holiday.
For full-time staff working five days a week this is 5 x 5.6 = 28 days holiday. For staff working six days a week it is capped at 28 days.
For part-time staff the amount of holiday is pro-rated depending on the days they work. For example, if they work four days week it is 4 x 5.6 = 22.4 days (rounded up to the nearest half day).
Holiday starts to accrue from the moment an employee starts working for you, at a rate of 1/12 their annual entitlement each month. You can choose to give your employees more holiday above the statutory entitlement as part of the package of benefits you offer them.
As you can see, the calculations for how much holiday is owed are relatively straightforward if your staff are full or part-time. Calculating holiday entitlement and pay becomes more complicated when you have staff who work irregular hours or shifts.
How much should you pay employees for holiday?
Your staff will receive normal pay for any annual leave they take, so the amount they are paid is the same as if they were actually working.
Working pattern and pay
If you have staff who work regular hours and have fixed rates of pay then the amount they receive will be the same as the hours they work. So, for someone who works full-time and takes a week’s holiday they will receive a week’s pay. If they work part-time for three days a week, then they will receive what they ordinarily would for three days’ work.
However, if you have someone who has an irregular working pattern and doesn’t work the same hours each week, then their holiday entitlement and pay will be calculated by taking their average weekly hours over the previous 12 weeks multiplied by their average hourly pay.
Calculating holiday pay in hours
For some staff it might be easier to calculate how much holiday pay they should receive in hours rather than days, for example, where someone works a compressed week and works 37 hours in four days instead of five. It’s also often easier to calculate in hours as they are accrued if a member of staff works very irregular hours or on a casual basis.
In these instances, the 5.6 weeks entitlement a year is equivalent to 12.07% of hours worked during the course of a year.
So, if someone works 15 hours they would be entitled to (12.07/100 x 15 = 1.81 hours = 108.6 minutes).
Confused? Our free online holiday calculator can help - it does the hard work for you and makes calculating holiday a breeze.
Rolled up holiday pay and when it applies
Rolled up holiday pay is when an employer pays holiday pay in the normal pay pack of a worker throughout the time they are working but doesn’t pay them when they are actually on holiday.
However, although some employers still use it, particularly those where staff are required to work during term time and take their breaks in term time holidays, it has now been ruled unlawful after a number of court cases.
The main reason for it no longer being lawful is because it defeats the provision in the EU Working Time Directive which provides for “paid for” holiday leave.
In one of the most recent cases the European Court of Justice (ECJ) ruled it could still be technically lawful if the system was completely transparent, the holiday pay part was recorded separately to the basic pay on a payslip and if there was provision in place to ensure workers did take their allowance.
So, while the system is technically unlawful, any sums already paid under a transparent scheme could be offset against any claim for unpaid holiday. The ECJ has offered no advice as to how long these “set off” periods will apply so employers may or may not be liable.
The problem with this is if a worker successfully argues breach of the Working Time Directive, they could be entitled to compensation which would mean an employer would effectively have to pay them twice for annual leave.
With that in mind, it is far better for employers to avoid rolled up pay altogether and calculate holiday pay for irregular or casual workers using the average hours worked in the 12-week period prior to holiday being taken. There is online HR software which can help keep track of hours and make the calculations for you.