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How to calculate holiday entitlement within your company

Holidays are a basic right for every worker, and as the human resources department of any company, you have to define a very clear holiday policy in order to regulate and manage time off for your employees. This article will help you analyse how to calculate holiday entitlement, dependent on different contextual situations.

The main principle behind holiday entitlement is clear; every year workers have the right to enjoy their well-deserved holidays. But how many days do they have? What if the worker has a part-time contract? What if the employee is on furlough? How does coronavirus affect workers’ entitlement to holiday? What happens when an employee leaves the company and has not used all the vacations that they are entitled to? Do you need to calculate the proportion of days for an employee who has joined in the middle of the year and if so, do you know how to do it? These are all important questions that can affect how you calculate holiday entitlement.

Today we present you with a guide to everything you need to know when calculating holidays within a company, to clear up any impending doubts.

Download Your 2021 Holiday & Absences Template

How many days of holiday is the worker entitled to per year?

Almost all workers (defined as those with a contract that are paid for their services) are entitled to 5.6 weeks of paid holiday a year, equivalent to 28 days. This is also known as statutory leave entitlement or annual leave.

UK Holiday entitlement background

Pre-October 1998, employees in the UK were not granted any statutory rights to have holiday leave from work, whether it be paid or unpaid. However, after the Working Time Regulations (WTR) were enforced, everything changed. Irrespective of what was stated on employees’ contracts, all workers became entitled to at least a minimum period of paid annual leave, regardless of the amount of time they have worked for the company.

4 of these weeks of annual leave are set by the EC Working Time Directive. The other 1.6 weeks are set by UK Law. Furthermore, England and Wales has 8 established public holidays: New Years Day, Good Friday, Easter Monday, the first and last Monday in May, the final Monday in August and Christmas and Boxing Day. It is customary in the UK that for full-time employees, the 8 days of public holidays are included in their 28 days of entitlement.

What is the difference between holidays, calendar days and working days?

Calendar days are every day of the year: 365 days, or 366 if it is a leap year. That is, from Monday to Sunday, each and every day. It is important not to confuse this with business days, which are non-public holidays (the latter can also be called “non-business days”).

On the other hand, we have working days, which are all those that are not holidays during which people normally work. Can Saturday be a working day? The answer is yes, however it depends on the contract, the activity in which the work is performed, the law, etc.

Holiday days are those in which a company employee has chosen NOT to work. The days which an employee takes off for holiday must fall on a working day. Since on holidays or non-working days, the worker is not obliged to work directly, unless his contract states that he must.

How to calculate holiday entitlement proportionally per month

You can manually calculate the number of days with a simple formula.

Formula to calculate holidays for days worked manually

If you want to calculate holidays by hand, you can use this formula:

Let’s take an example:

If your companies holiday policy grants employees 28 days of holiday and if the employee joins on January 1, you must divide the employee’s 28 days of holiday by 12 months of the year. This gives you a total of 2.3 days off per month. Therefore, as the employee started in January, they will be working 12 months this year, meaning the employee will have a total of 28 days of holiday at their disposal.

Using Factorial to manage the holidays of your company’s employees, means that the proportion of days each employee is entitled to holiday is calculated automatically. When you enter the employee’s data into Factorial, we calculate the number of days available for that worker based on the day they first started working for the company.

Holiday calculation in Excel

Managing your employees’ holidays on Excel is a not uncommon practice in small businesses that may not have many employees and don’t need to automate this process yet. With little background knowledge on how to use excel, a Human Resources manager can create a functional table to count the holiday days. Also using the addition, subtraction, division and multiplication formulas, they can get the totals or the pending vacations.

Click here to access our guide on how to manage time-off requests on Excel.

However, if Excel is not your thing and what you want is a template that you can fill out, you can download our 2021 Excel template for the management of your employees’ absences and vacations.

calculate holiday entitlement

Exceptions to holiday entitlement

How to calculate holiday entitlement for part-time workers

Employees that work part-time, will receive a pro-rata holiday entitlement. Meaning they will not receive the full amount, it will be proportional depending on the hours worked. Therefore, if an employee works 3 days a week, to calculate their holiday entitlement, you would simply work out 3 x 5.6, giving you 16.8 days off.

Holiday entitlement for employees who joined later in the year

Employees that joined the company halfway through the year for example will also receive a pro-rata entitlement of holiday. So if they were to have joined in March, the calculation would be 10 x 5.6, giving them 56 days off for that year.

Entitlement for employees that have been dismissed

Whatever the cause of the dismissal of the worker, they will have to be paid for the vacations not taken. Then, the equivalent of 2.3 days of holiday per working month must be paid to the employee.

Holiday entitlement with furlough

Those workers that have been put on furlough continue accruing holiday entitlements even whilst they are not working. Workers can also take holidays whilst still on furlough.

How can I calculate the number of vacations not taken?

As previously stated, in the event that the worker’s contract ceases, the only vacations that must be paid are those that have not been taken during the period of time in which the employee was working for the company. This involves those workers who leave the company and have not been able to enjoy their entitled holidays.

In this case, you must calculate the holidays you are owed for the days that you have worked (with the formula that we have indicated in the previous sections). Then you must subtract this number from the vacations already taken.

And what happens if a year passes and a worker who still works for their company has not enjoyed all the vacations that he had to enjoy? Do you have to pay that amount? Do the holidays accumulate? Are they carried over to the following year?

In case this happens, the holidays can be accumulated for the following year. Then, the company will have to include in its vacation policy how long the employees will have to enjoy those vacations. Additionally in the UK, the government has announced that it will allow a maximum of 4 weeks of unused holidays to be carried over to the upcoming 2 years of leave, if that time has not been taken by an employee due to covid.

All of these complications can easily be simplified by using Factorial’s easy to use intuitive software. Factorial automatically works out how much holiday each employee is entitled to depending on their contract. Saving you time, money and hassle.

Try Factorial today for your 14 day free trial!

This post is also available in: Español, Italiano

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