Holiday entitlement overview

The very first question you need to ask yourself when calculating holiday entitlement for an employee is whether they are full-time, part-time or zero hour contract workers. Depending on the answer, you'll have a different approach to each allowance.

Regardless of the answer, however, you’ll have to agree and work out their holiday entitlement and include it in their employment contract or statement of employment and you need to do this within two months of their start date.

Full-time workers

The law is very clear here – all full-time workers are allowed 5.6 weeks holiday a year. This is the statutory entitlement that all employers must provide as an absolute minimum. If you don’t you’ll be breaking the law. Of course, if you’re a particularly generous employer you may want to give them more but that’s up to you.

Part-time workers

Part-time workers are also entitled to a statutory minimum of 5.6 weeks holiday a year. But working out exactly how many days that entitles them to can be difficult. 

The actual holiday entitlement bit is fairly straightforward but how do you factor in bank holidays? What if the employee doesn’t ever work Mondays or Fridays when bank holidays normally fall?

You could just give them the day off when bank holidays fall but that policy tends to favour those who work bank holiday days. If they never do it might be easier to take the full holiday allowance, add the bank holidays and then pro-rata it down to the days they work. 

If they work different hours each day for example, on Mondays they do five hours but on Wednesdays, it’s eight, then you need to calculate holiday entitlement in hours.

It all sounds a bit complicated, but you can take the headache out of calculating their exact time off by using an online holiday calculator.

Zero hour workers 

Zero hour contracts have had a fair bit of press in recent years because they’re generally considered to be contracts where the employer doesn’t guarantee work for the employee, there are no set minimum hours and employees only get paid for the hours they work. 

You might think, reading that definition, that workers on a zero hour contract aren’t entitled to holiday pay. But zero hour workers accrue holiday in the same way as full or part-time workers and are entitled to 5.6 weeks holiday a year.

Getting around the bank holiday headache

Knowing how to deal with bank holiday entitlement in relation to your employee's annual leave allowance can understandably leave you scratching your head. Should they form part of the annual holiday entitlement or be additional to them? What happens if someone never works Mondays or Fridays when most bank holidays normally fall?

With eight bank holidays in the UK a year (a couple more in Northern Ireland) it’s something you need to consider for all workers.

Contrary to popular belief, workers don’t have a statutory right to not work bank holidays. You as an employer or HR manager get to decide whether or not they can. You can also decide whether bank holidays are part of their holiday entitlement or additional to it, but you must lay those terms out in any contract of employment. Whether you offer extra pay for working bank holidays should also be outlined.

When it comes to bank holiday entitlement for part-time workers they are entitled to the same amount of bank holidays but on a pro-rata basis and, if employment terms state they have to work bank holidays, then they have no right to refuse.

Unlimited holiday

You’re probably wondering if such a thing as unlimited holiday really does exist, but yes it does, especially in agile tech companies in the USA with a number of UK employers following suit. The philosophy behind it is that your staff should be responsible enough to manage their workload and time off to ensure that everything that needs to be done, is done.

It’s entirely up to you whether you decide to implement an annual leave policy like this and it may well be dependent on the kind of business you run. Naturally, there will be some jobs where it might not be possible to offer such a perk.

As with anything there are pros and cons. The pros include greater productivity, improved employer brand, and happier staff. Plus, in a world where job insecurity is rife, it is unlikely many staffers would take too much time off for fear of being missed and replaced. The cons include greater absenteeism and the potential for employees to abuse the holiday policy as well as the logistics of how you implement it in practice.

If you decide upon such a policy, then it needs to form part of your employee’s contract of employment laying out the terms or your company handbook.

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Holiday pay

To pay or not to pay staff – that is the question. The answer is yes, you have a statutory duty to pay them for their annual leave. The 5.6 weeks a year that staff are allowed is paid holiday and their pay during this time is equivalent to how much they get paid for a usual week’s work. This applies for both full-time and part-time workers with fixed hours and fixed pay. 

In the case of a zero hour worker or casual worker with no fixed hours their week’s holiday pay is worked out as an average of the previous 12 weeks they worked.

Calculating holiday entitlement

Full-time workers

Your starting point for full-time workers is the statutory entitlement of 5.6 weeks a year. Full-time workers work a five-day week so you multiply 5.6 x 5 which gives you 28 days. However, even if an employee works six days a week their holiday entitlement is capped at 28 days.

It is also up to you, as the employer, whether the 28 days’ holiday is inclusive of bank holidays or whether you give them 28 days plus bank holidays in addition. 

Part-time workers

Part-time workers have the same rights to holiday as full-time workers and are entitled to 5.6 weeks a year on a pro-rata basis. What this means in practice is you multiply 5.6 by the number of days they do work a week to get their holiday entitlement.

For example, if they work three days, the calculation is 5.6 x 3 which gives them 16.8 days. You then round that up to the nearest half day making their holiday entitlement 17 days.

With bank holidays, there is an issue because not all part-time staff will work on days that fall on bank holidays, meaning you could be seen to favour those who do. You need to make sure they benefit from bank holiday leave, even if they don’t normally work bank holidays. The easiest way to deal with this is to add bank holidays to their leave and pro-rata it down.

This part-time holiday calculator can help you work out the annual leave entitlement of your part-time employees.

Zero hour contract workers

Zero hour workers are entitled to holiday in the same way as full- and part-time workers at a rate of 5.6 weeks a year. However, someone on such a contract might work 12 hours one week, 20 the next, then none the next. Because of this flexibility, it is often easier to calculate their entitlement in hours rather than days.

To work out how much holiday they should take, you should take an average of the hours worked in the 12 previous weeks. If there were any weeks when they weren’t working and therefore weren’t paid anything, then those weeks should be substituted with the most recent previous weeks where they were paid for working.

Annual leave year

Your annual leave year is the period in which you calculate annual holiday entitlement for your employees. For some companies, this will be a normal calendar year which will run January 1 to December 31. Other companies will use their tax year, or begin the year from the date of the companies conception, but basically you have the right to choose whatever year period you want.

You should include details of your leave year in any contracts of employment.

Calculating holiday for a new starter

Employees start to accrue annual leave entitlement from the moment they join a company.

For those on a fixed-term or fixed hours contract, both full and part-time, they accrue holiday monthly in advance at a rate of one-twelfth of their annual entitlement. Zero hour workers start to accrue leave in the same way but it is easier to work it out in hours they have worked because of the sporadic nature of those hours.

Calculating holiday for a leaver

Whether you were expecting a certain employee to leave or it comes as a bit of a shock, it does trigger certain actions concerning their holiday pay and entitlement.

Your employee will be entitled to use up any remaining leave they have during their notice period. You can only refuse a request for annual leave for a valid business reason. You also have the right to ensure employees use up all their leave and can notify them of times when this leave should be taken but you must give them notice which must be at least double the number of days you want them to take. So if you are asking them to take one week of leave, you must provide them with two weeks notice. 

Taking more than entitlement

If an employee resigns but they have already taken more holiday than they had accrued at the point of resignation, then you can make a deduction from their final pay. However, you need to agree this beforehand with the employee and put it in writing. The rules around this should also be in their employment contract or company handbook.

Payment in lieu of holiday in notice period

Whether your employee chooses not to use up their holiday entitlement during their notice period or whether it’s just not possible for them to take it, then you must offer them payment in lieu for their remaining holiday entitlement.

Accruing holiday entitlement

Employees start to accrue holiday from the moment they start working for you. Staff accrue holiday as a monthly proportion of their annual entitlement. So, each month they accrue one twelfth of their annual entitlement in advance.

For example, if a worker that has 28 days annual entitlement starts working in January, then by June they will accrue 6/12 of that annual entitlement or 14 days. 

An employee will still build up leave even if on maternity, paternity, adoption or sick leave.

Part-time employees and zero hour workers accrue holiday in the same way but it is calculated slightly differently. For part-time workers you will work out how many days a year they are allowed by multiplying the annual entitlement of 5.6 weeks by the days they work e.g. 5.6 x 2 = 11.2 which you round up to the nearest day so 11.5.

If you apply the same situation in the example above for a full-time worker, a part-time worker who starts in January will have accrued 5.75 days holiday.

Zero hours workers are also entitled to a pro-rata amount of the 5.6 weeks a year entitlement but this is worked out on hours rather than days. Holiday is accrued at a rate of 12.07% per hour.

Carrying over leave into the next holiday year

Carry over is a term used in relation to annual leave and referring to when an employee has unused holiday that they would like to 'carry over' into the next holiday year. If someone still has five days holiday left, can they carry it over to next year?

Under the EU working time directive employees must get four weeks’ paid leave a year and it must be taken in that leave year or it will be lost. The extra 1.6 weeks (or eight days) available in the UK can be carried over to the following year if you agree to it as an employer. 

You can also write in extra leave and what happens around it into an employee's contract. For example, a new trend is to add a couple of days onto an employee's holiday allowance to act as duvet days.

The exception to these rules around carry over is if an individual is unable to take their statutory minimum leave e.g. because of sickness or maternity, in which case it can be carried over to the following year but must be taken within 18 months.

As a business however, it is entirely up to you whether you allow leave to be carried over. Staff wellbeing and morale is important but, at the same time, you don’t want a rush of people all taking extra leave to fit it in and leaving you short-staffed. If employees know they can roll over leave they might also not take adequate breaks throughout the year which research shows can lead to employees feigning illness in order to have time off work and rest.

Booking time off

If an employee wants to book time off, then they must give you at least twice the amount of notice of the time they want off e.g. two weeks’ notice for one week’s leave. 

As a business, you should have an agreed process for your employees to follow when requesting annual leave. Whether that's using a paper form or an online holiday management system, and this should be clearly outlined and communicated to your staff. 

It is possible for an employer to refuse a request for annual leave, but, again, you must give as much notice as the amount of leave requested and it is best practice to provide the employee with a reason as to why their annual leave request was denied. Not doing so could result in your employee feeling unvalued and understandably disgruntled.

Booking holiday in part days

You may have some workers entitled to a half day of annual leave if they’re part-time, for example. How you let them take part days is up to you, as their employer, and can be written into employment contracts or your employee handbook.

Can you choose when employees take annual leave?

As an employer, you have the right to specify when leave should be taken by your employees. You can insist employees take bank holidays or Christmas as leave and the days will be deducted from their annual leave allowance. You can also restrict leave at certain times of the year such as periods of work which are really busy for your company such as sales. 

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