Every year, your employees work hard and look forward to taking a well-earned break. For this, they dip into their holiday leave entitlements. As an employer, you are responsible for calculating these entitlements for your employees. Aside from employees having the right to enjoy what they are entitled to, incorrect calculations could result in underpayment issues and potential legal consequences. However, calculating leave entitlements can be complicated and time-consuming. To help, this article will explain how to work out your employees' entitlements to holiday leave.
What is Holiday Leave?
Holiday leave is a type of annual leave to which some employees may be entitled to. It is also commonly termed annual leave or statutory annual leave.
The majority of workers in the UK must receive the legal minimum amount of 5.6 weeks holiday leave, equivalent to 28 days. You must pay for this leave as the employer.
You should note that it is the employer's discretion as to whether or not bank holidays are included in this entitlement.
How Do I Calculate Holiday Leave Entitlement?
An employee's holiday leave entitlement begins to build up from the first day they start their job. Employers may, therefore, need to calculate their employee's holiday leave entitlement for a full leave year. When the employee starts or leaves the job part-way through the year, they will need to calculate the percentage due.
When calculating the holiday leave entitlement for your employees, you will need to base the leave on their chosen statutory annual leave year period, which is in their employment contract. For example, this could be the same as the academic year and run from 1st September to 30th August. If you have not specified the period for their leave year, you should base it on:
- the date the employee started their job where the start date was after 1 October 1998; or
- the 1 October to the 30 September where the employee started their job before or on the 1 October 1998.
Full-Time Staff
Full-time staff, or those who work a full five-day week, receive 5.6 weeks of annual holiday leave. You must pay for this. Where staff are full-time but work more than a five-day week, you do not need to give them more than 28 days annual holiday leave.
Part-Time Staff
Part-time staff should also receive 5.6 weeks annual holiday leave entitlement. However, the amount they receive in practice will be less than this because their entitlement will be based on the actual number of days they work per week.
You can calculate the holiday leave entitlement for part-time employees by multiplying the number of days they work by 5.6. For an employee working 4 days a week, their annual holiday leave entitlement will be 22.4 days.
Employees Working Irregular Hours
Additionally, if you employ shift workers or term-time workers, they work irregular hours, and their annual holiday entitlement is based upon the hours they work. The simplest way to calculate their annual holiday leave entitlement is by using the tool described below.
Tools for Calculating Holiday Leave Entitlements
Government Calculator
The simplest way to calculate your employee's holiday leave entitlement is to use the government's tool. This tool allows you to calculate the employees' leave entitlement for:
- the number of days per week which they work;
- the number of hours per week which they work;
- workers on zero-hour contracts as well as other casual or irregular hours;
- the number of hours worked annually;
- compressed hours worked; and
- the number of shifts worked.
Accrual System
Alternatively, you may choose to use an accrual system to calculate your employee's annual holiday leave entitlement. You can use this when calculating leave during the employee's first year of employment.
The accrual system allows employees to take one-twelfth of their annual holiday leave entitlement each month. Where an employee is entitled to the full 28 days annual holiday leave entitlement as they work a five-day week, once having worked for two months, they would be entitled to take 4.6 days annual holiday leave. You can make this calculation by taking 28 days, divided by 12 months, multiplied by 2 months of work.
Important Points to Note When Calculating Holiday Leave
Holiday leave continues to build up when an employee takes other forms of leave, such as parental or maternity leave. Holiday leave also builds up when an employee is off work on sick leave. Additionally, where employees were on a period of furlough due to COVID-19, their entitlement to annual leave still builds up during this period.
Be sure to note whether or not your employee has any leave entitlement carried over from the previous leave year. By law, the first four weeks' leave should only be taken in the leave year when it is accrued, subject to the changes introduced during COVID-19 lockdown. An employer can also set the minimum number of days that an employee can carry over.
Key Takeaways
As an employer, you are responsible for calculating your employee's holiday leave entitlements. You must know how to do this and the rules surrounding it. This article has outlined how to calculate your employee's holiday leave entitlements.