Guidance for Employers
How Do You Calculate Employee Holiday Correctly?
Holiday calculations can often by confusing, for example, if someone joins or leaves a company part-way through a year, and is something that we get many, many questions about. This blog post answers the questions we receive most frequently.
How Do You Calculate Employee Holiday Correctly?
25 April, 2017
by Kristina Lukaviciute
We fully appreciate that this may not be the most exciting of blog post topics but holiday calculations for people joining or leaving a company part way through a year is something that we get many many questions about. In this blog post we’re going to answer the questions we most frequently receive.
1. The History of Annual Leave
Annual leave entitlements for workers in the UK have increased fairly substantially in the last 10 years. In 2006 workers had a statutory entitlement to 20 working days of holidays in a year. Then in October 2007 this increased to 24 days and from 1st April 2009, the annual leave entitlement went up to a total of 28 days’ minimum.
Whilst the increases have been gradual and therefore enabled businesses to prepare for the changes, we still do come across clients who have not fully understood these changes and what this means in practice when completing holiday accrual calculations.
So, let’s go back to 2006, a typical full time worker would have had a total of 20 days holidays a year. The employer was able to choose whether they wanted to grant the worker another 8 days of leave on bank holidays giving them 28 days total holiday or whether they wanted to include these bank holidays in the full entitlement of 20 days and therefore the employee had 12 days which they could take when they wished and 8 days that they had to take on public holidays.
However, in 2009 the rules were changed meaning that all employees now have a statutory minimum entitlement to 28 days holidays a year.
2. How does statutory holiday impact normal holiday calculations?
Employers were used to treating bank holidays as just days that are additional to workers’ yearly leave entitlement and therefore they were never accounted for or included in any accrual calculations.
However, since 2009, a worker’s minimum entitlement is to 28 days of leave (5.6 weeks), which means that any calculations now need to include the bank holidays.
3. Calculating Holiday Accruals (Bank Holiday implications)
If you are an employer and your employment contracts give a total of 28 days leave in a year which is comprised of 20 days to be taken at any time and 8 days to be taken on a bank holiday, here’s how you would need to calculate any holiday leave accruals for new starters or leavers:
28 days/12 x Number of Months worked for the employer in a year
4. Calculating Holiday for New Starters
Let’s say you have a new starter who joined the business in April 2017 and your holiday year runs from January to December, they would be entitled to the following annual leave this year:
28/12 x 9 = 21 days of leave
If you want to allow them to have time off on bank holidays, then you would need to remove the bank holiday days that you have for the remainder of the year from this entitlement:
21 – 7 days (Bank Holidays April -December) = 14 days.
So the worker would be entitled to a total of 14 days to take whenever they please and all of the bank holidays in 2017 (April – December).
5. Calculating Holiday for Leavers
Let’s say you have a leaver in a business who is leaving on 30th June and they have taken a total of 5 days holidays this year and also any bank holidays in the period they worked. Their holiday accrual would be:
28/12 x 6 days = 14 days
You would then need to deduct the amount of leave that they have already taken which is 5 days but also the bank holidays from January to 30th June as they were also on leave on these days. So, this would be 14 – 10 (another 5 days Bank Holidays) leaving the worker with just 4 days of holiday pay in lieu due to them.
6. Statutory Maternity Leave
Holiday calculations of accruals for workers going on maternity leave should also be based on the calculation taking the 8 bank holidays into account. You need to remember that 28 days is the minimum statutory entitlement and so you must allow for this figure to accrue for workers when they go on maternity leave.
The key to remember here is that workers have a minimum entitlement to 5.6 weeks (28 days) holidays in a year and any part-year calculations of accruals need to be based on this amount. If bank holidays are not included and the accruals are calculated just on 20 days, then the employer is not meeting the statutory minimum holiday entitlement.
Holiday calculations can be complicated as there are a number of things to consider. So if you are struggling or are unsure of the entitlements or calculations in your business, we at Lighter HR would be happy to help you.
Why not give us a call on 0203 319 1649 and we can go over your calculations to ensure that you not falling below the minimum statutory requirements.