Calculating holiday entitlements can be confusing, especially within companies that employ full-time, part-time and variable-hour employees or have staff on zero-hour contracts.
In this article, we’ll guide you through how to work out holiday entitlement and pay. We will also look at the benefits of using a holiday entitlement calculator and HR software to digitise and streamline the process.
Table of Contents
- Statutory Holiday Entitlement in the UK
- Calculating Statutory Holiday Entitlement Per Month
- Exceptions to Paid Holiday Entitlement
- Factorial’s Time Off Tracker
- Holiday Pay Entitlement
- How is Holiday Pay Calculated?
- What is Rolled Up Holiday Pay?
- Overtime Pay and Laws in the UK
- Calculating Holiday Pay and Days Owed with HR Software
Statutory Holiday Entitlement in the UK
How Much Holiday Is Each Worker Entitled to Per Year?
Almost all UK workers are entitled to 28 days of paid time off, which is the equivalent of 5.6 weeks off. This includes agency workers, workers with irregular hours and those on zero-hour contracts and workers with irregular hours. This is classed as a legal statutory leave entitlement or annual leave entitlement. During paid time off, the employee is usually paid at the same rate as their working wage.
Employers can include the total of UK bank holidays (or ‘public holidays’) within their minimum holiday entitlement – this is up to the employer and should be stated in an employee’s contract. The total amount is usually eight bank holidays, although additional days can be added for unique occasions.
These rules came into effect after the Working Time Regulations (WTR) and EU Working Time Directive were enforced, outlining a minimum period of paid annual leave to all employees regardless of the amount of time they have worked for the company.
What is Pro-Rata Holiday Entitlement?
Pro-rata holiday entitlement is determined by calculating an employee’s annual leave based on their length of service within the holiday year.
For full-time employees working five days a week, the statutory minimum is 28 days’ paid annual leave per year, equivalent to 5.6 weeks of holiday. Part-time workers who consistently work the same number of hours each day, Monday to Friday, are also entitled to 5.6 weeks’ holiday. However, their entitlement is proportionately fewer than 28 days due to their reduced weekly hours.
Zero-hours workers have the same annual leave allowance as full- and part-time employees, which is 5.6 weeks per year. However, given the nature of their contracts, where hours can vary significantly from week to week (e.g., 12 hours one week, 20 hours the next, and no hours in subsequent weeks), it is more practical to calculate their entitlement in hours rather than days.
To determine the days holiday they should take, an average of the hours worked over the preceding 12 weeks should be calculated. If there were any weeks where no work was performed and no pay was received, those weeks should be substituted with the most recent previous weeks where work was performed and payment was received.
Calculating Statutory Holiday Entitlement Per Month
You can manually work out how much annual leave an employee is owed with a simple formula.
Imagine your company’s holiday policy grants employees 28 days of holiday and if the employee joins on January 1st. To calculate their work-free days, you must divide the employee’s 28 days of holidays by 12 months. 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. This means the employee will have a total of 28 days of holiday at their disposal.
Using Factorial to manage the holidays means that your employee holidays are calculated automatically. When you enter the employee’s data into Factorial, our all-in-one software calculates the number of days available for that worker based on the day they started working for the company.
Bank Holiday Entitlement
Workers are not legally entitled to not work on bank holidays. Employers have the authority to determine whether they can work on such days. They can be part of standard holiday entitlement or offered separately as an additional benefit, as long as this is clearly stated in the employment contract alongside whether there is extra compensation for working on bank holidays.
Part-time workers are entitled to the same amount of bank holidays but on a pro-rata basis. If the terms of their employment dictate that they must work on bank holidays, they do not have the right to refuse such work.
Exceptions to Paid Holiday Entitlement
1. Pro-Rata Holiday Entitlement For Part-Time Workers
To determine an employee’s holiday entitlement, you can multiply the number of days they work per week by 5.6. For instance, the statutory paid holiday of a part-time employee working three days a week would be worked out as follows: 3 x 5.6 = 16.8 days.
Likewise, if a staff member joins or departs during the holiday year, their annual leave will be calculated based on their actual employment duration with you. It will be a proportionate share of the full entitlement they have accumulated, referred to as their pro-rata holiday entitlement.
2. Annual Holiday Entitlement For Employees Who Joined Mid-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.
3. Entitlement For Dismissed Employees
Whatever the cause of the worker’s dismissal, they will have to be paid for the holidays not taken. Then, the equivalent of 2.3 days of holiday per working month must be paid to the employee.
4. ‘Carry Over’ or Accrued Days
If an employee has unused holiday days, they can transfer them to the next holiday year – in some cases. According to the EU Working Time Directive, untaken statutory leave will be forfeited. However, in the UK, the additional 1.6 weeks (equivalent to eight days) can be carried over to the next year if agreed upon by the employer.
Circumstances like illness or maternity count as exceptions to this rule. In these cases, the leave can be carried over to the following year as long as it’s used within 18 months.
Factorial’s Time Off Tracker
You can use our time off tracker to work out prorated annual leave entitlements for part-time staff or to calculate holiday allowances for employees who start or end their employment with you in the middle of the year.
Simply enter how many days a week an employee works, what your holiday entitlement is for a full-time employee, and whether or not they started accruing holidays part way through the year, and we will do the rest!
Holiday Pay Entitlement
Holiday pay refers to the compensation an employee receives when taking their legally mandated holiday entitlement. For full-time employees with fixed weekly working hours, this equates to receiving the same amount of pay as they would in a regular workweek.
Legally, the average worker is entitled to receive one week’s pay for each week of statutory holiday taken. In most cases, employees are granted 5.6 weeks of paid holiday within a year. This is separate to other types of payment like statutory sick pay.
How is Holiday Pay Calculated?
Calculating Holiday Pay For Full-Time Employees
Generally speaking, it’s straightforward to calculate the holiday pay for full-time employees. For those employees on a fixed monthly salary, you must determine the average number of hours worked over a specific period, such as a week or a month. This average is then divided by the corresponding amount of payment.
For example, if a worker takes a week’s holiday, they will receive the same pay at the end of the month as they usually receive. Issues only arise when an employee starts or leaves partway through the holiday year (a holiday entitlement calculator is an invaluable tool in these cases).
Calculating Holiday Pay For Variable Hour Employees
If an employee is part-time or on a zero-hours contract and works fewer hours each week, they will receive less paid holiday allowance. They are still entitled to 5.6 weeks of paid leave but in proportion to the hours that they actually work. This is simple enough if they work a set number of hours weekly.
However, if an employee works variable hours things can be a bit more challenging. Employers must look back at a worker’s previous 52 paid weeks, known as the holiday pay reference period. For those workers who have been working for less than 52 weeks, the reference period is the total number of weeks they have worked. You must use their average hourly rate or average weekly pay during this period to make your calculations.
Holiday Pay Calculator
You can use this government tool to calculate holiday pay owed to your employees.
What is Rolled Up Holiday Pay?
“Rolled-up pay” is a term used to describe a practice where employers provide an additional payment on top of the regular hourly rate instead of granting time off for holidays at the time of payment. It’s usually calculated at a rate of 12.07% above the hourly pay rate.
Offering rolled-up holiday pay is unlawful as it means employees do not receive paid holidays at the time when they actually take their annual leave.
Overtime Pay and Laws in the UK
There is no statutory requirement for a UK employee to work overtime, just as there is no statutory requirement for an employer to offer additional hours.
There’s also no legal obligation to pay employees for working extra hours. However, you must ensure that the average pay for the total hours the employee works do not fall below the National Minimum Wage.
To find out more about overtime pay and how to calculate it, read our full guide here.
Calculating Holiday Pay and Days Owed with HR Software
Time off is the most important thing to consider when calculating holiday entitlement. This can be a time-consuming and complex process if you have a range of contract types. You need to be sure about the hours each employee has worked and have kept a reliable record of this.
Implementing a digital solution is the most effective way to ensure your holiday entitlement calculations are accurate. This will streamline the process, saving you time and headaches in the long run. Doing so will also ensure you comply with UK holiday pay and time off regulations.
With Factorial’s Time Off Software, you can keep track of fixed hours worked from one centralised place. Our all-in-one, cloud-based solution acts as an automated holiday entitlement calculator for your organisation. It also facilitates holiday requests and approvals to quickly track remaining holidays.
See it in action for yourself with a free demo.