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How to calculate holiday entitlement

Employers have a legal obligation to provide their staff with paid holiday during the working year. As all employees and almost all workers are entitled to paid holiday it's important to understand how much holiday each person is entitled to and how much pay they should receive. Read this guide to make sure you understand your obligations as an employer, your rights as an employee and that you know how to work out annual leave entitlement.
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Most employees who work a normal 5-day week (ie Monday to Friday) are entitled to 5.6 weeks of holiday. This is equal to 28 days in the working year. Holiday can be inclusive or exclusive of bank and public holidays. It is good practice for employers to set out employees’ annual leave entitlement in an Annual leave policy.

In England and Wales, there are currently 8 bank holidays, while in Scotland there are 9. Bank holidays tend to be automatic public holidays (ie the majority of workers are given the day off and the day is generally observed as a holiday) in England and Wales. In Scotland, however, there is less uniformity regarding which bank and local holidays are granted as paid leave to employees. As a result, Scottish employment contracts will usually provide a holiday entitlement of a mixture of bank and local holidays and, according to the Scottish Government, most employees in Scotland do not have paid leave on all bank holidays.

Employers can use a 'leave year' or 'accrual system' to calculate an employee's annual leave entitlement. 

Leave year

Employers must tell their staff the dates for their statutory leave year as soon as they start working. Staff must take their paid holiday during the statutory leave year unless they’re allowed to carry over leave into the next year. 

The employer’s leave year should be set out in the Employment contract. If this is not the case, then the leave year will start on the day the employee first started working. 

For example, a business’ leave year could run from 1 January to 31 December if stated in the contract. An employee who starts part-way through a leave year will only be entitled to part of their total annual leave for the current leave year, depending on how much of the year is left.

Accrual system

The accrual system is where the employee gets one-twelfth (¹⁄₁₂) of their leave in each month they've worked. For example, an employee who has worked for 3 months will be entitled to one quarter (¼) of their total leave (ie seven days if they work a normal 5-day week).

To learn more about some tricky issues related to annual leave, read Employee holidays.

The legal obligation to provide paid holiday not only extends to full-time workers, but to part-time workers, agency workers and casual workers as well. It’s important to calculate the exact amount of holiday a particular worker is entitled to to stay compliant with the law. The exact amount of holiday somebody is entitled to will depend on the type of employee or worker they are. You can calculate an individual worker's statutory holiday entitlement by using the Government's web tool.

Full-time workers

Full-time workers are entitled to 5.6 weeks (ie 28 days) of paid holiday per year, if they work 5 days a week.

5.6 weeks is the maximum amount of paid holiday an employee is obliged to provide in the working year. If an employee works more than 5 days a week (ie 6 or 7), they will still only be entitled to 5.6 weeks of paid holiday a year. An employer can choose to offer more leave than the legal minimum. Employers can also decide whether to include bank and public holidays as part of a worker's holiday entitlement or give these as extra leave days which can be taken at a later date.

Part-time workers

Part-time workers are entitled to paid holiday, however, they don't need to be given the full legal minimum as they work less than full-time workers. Part-time workers are given paid holiday on a pro-rata basis. This means that their holiday entitlement is calculated based on how many days or hours a week they work. 

For example, if a part-time employee worked 4 days a week, they would be entitled to 22.4 days of paid holiday in a year. The calculation is 4 days x 5.6 weeks. Where the answer is not a round number, you should always round up to the nearest half day. For example, a worker who is working 3 days a week gets 17 days of annual leave, although the actual entitlement is 16.8 days. 

It is also important to remember that part-time workers should not be treated less favourably than full-time workers. For example, if full-time employees are given extra days off then this must also be given to part-time employees as well.

Workers on casual or irregular working hours

This mainly applies to casual staff, seasonal workers (also known as workers with ‘annualised hours contracts’), and workers on Zero-hours contracts.

Zero-hours workers are entitled to statutory paid holiday. Calculating the amount of holiday a worker on a casual contract is entitled to can be complicated and it's best to calculate it on an accrual basis in hours. 

As zero-hours workers are not obliged to work at any particular time, they can take holiday when they choose. What matters for these workers, therefore, isn’t the accrual of holiday entitlement so much as the calculation of holiday pay.

Shift workers

Shift workers' holiday entitlement is calculated by using an average of their shifts over a 12-week period.

All staff members who take paid holiday should be paid the same rate that they're normally paid for their work. A week's pay is calculated according to the kind of hours someone works and how they're paid for the hours.

A shift worker with fixed hours should receive holiday pay equal to the average number of weekly fixed hours the worker worked in the previous 52 weeks, at their average hourly rate.

Casual workers (including those on zero-hours contracts) are entitled to holiday pay. A casual worker should receive holiday pay equal to the average number of weekly hours the worker worked in the previous 52 weeks, at their average hourly rate. The 52-week period excludes any weeks not worked for which no pay was received. Casual workers are also eligible for payment in lieu of any untaken statutory paid holiday on termination of their employment. This reflects the same rights given to full-time and part-time employees.

How to calculate casual workers’ holiday entitlement

To work out a casual workers' holiday entitlement you work out their average pay over the previous 52 weeks, and ignore any weeks not worked. In practice, this means that you need to:

1. Determine the 52-week period immediately before the worker started their holiday

Rely on the whole last week in which the worker worked their contracted hours, ending on (or before) their first day of leave. Generally, a week runs from Saturday to Sunday. However, if a worker’s pay is calculated in reference to a different 7-day period (eg Wednesday to Tuesday), you should use that period to determine the worker’s work week. 

In your 52-week calculation, you should ignore any weeks in which the worker:

  • did not work and wasn’t paid

  • was not working because they were on sick leave

To replace any ignored weeks, you should use earlier weeks to calculate the total of 52 weeks. You can count as far back as 104 weeks to build a worker’s appropriate 52-week period.

If you don’t have a full 52-week period in which the worker was paid (eg if they’ve worked for you for less than 52 weeks), you should use the maximum number of full weeks the worker worked and was paid. Again, you should exclude any weeks in which they were not paid.

2. Calculate the worker’s normal pay over the 52-week period

To determine the worker’s pay, you should add together the following payments the worker received over the 52 weeks:

  • wages

  • any regular commission payments (eg monthly sales commissions), and

  • any regular bonuses (eg regular monthly bonuses, but not discretionary bonuses, like Christmas bonuses)

3. Calculate the worker’s average pay

Calculate the worker’s average: 

  • weekly pay - divide the worker's normal pay that you determined in step 2 by 52

  • daily pay - divide the worker's normal pay that you determined in step 2 by the number of days worked in the 52-week period

  • hourly pay - divide the worker's normal pay that you determined in step 2 by the number of hours worked in the 52-week period 

Once you have the worker’s average pay, you then multiply their weekly, daily or hourly pay by the appropriate period of leave. This will give you the holiday pay for the casual worker.

For more information, see the Government’s guidance.

It is common practice for employers to require their workers to give notice of a request to take paid holiday. The amount of notice is usually twice as long as the amount of leave a worker wishes to take (eg 4 days' notice for 2 days' leave).

An employer has discretion over when workers must take their holiday and can restrict when leave can be taken. For example, employers can:

  • set out when holiday must be taken (eg over Christmas)

  • restrict when leave can be taken (eg during busy periods) 

This may be set out in the employment contract or workplace policies (like an Annual leave policy). Where an employer wants their staff to take or not to take holiday, they must provide at least twice as much notice as the amount of leave they want staff to take.

If an employer wants staff to take leave, they need to inform staff members in advance (ie before the notice begins). They must also make sure that staff members can relax, rest and enjoy leisure during their holiday. This means that employers cannot require sick workers to take holiday (instead of sick leave).

Employers can also refuse holiday requests or cancel holiday. To do this, they must give the worker the same amount of notice as the leave requested, plus one day. For example, if an employer is cancelling a worker’s request for 5 days of holiday, they must provide 6 days’ notice.

All in all, employers should try to accommodate all requests from their staff and they cannot prevent holidays from being taken altogether.

Employees and workers are allowed to make a complaint to the Employment Tribunal about an employer's refusal to allow reasonable time off. These rights are also regulated and exercised by the Health and Safety Executive (HSE) and local authorities. Employers could face heavy penalties for not allowing their workers to take time off or not paying the correct amount of holiday pay. Creating an Annual leave policy can help you to comply with employer obligations related to employee holiday and holiday pay.

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