02 July 2024
Considering the recent changes to holiday pay and entitlement, this news article will summarise how to calculate holiday pay and entitlement for certain types of workers.
When reviewing what annual leave entitlement a worker will receive, we need to look at what category they fall into for holiday pay and entitlement purposes. It will be one of three options:
- worker with a set number of hours per week / month in a contract
- worker without a set number of hours per week / month in a contract (irregular-hour (IR) worker)
- worker who work part of the year (part-year (PY) worker).
Workers with a set number of hours per week / month in a contract
If you are processing holiday pay and entitlement to a worker with a set number of hours set out in a contract, regardless of whether they work over and above those set hours:
- they will receive a minimum of 5.6 weeks annual leave entitlement per year
- they may receive more than this, if they are entitled to enhanced annual leave entitlement by their employer
- if they work over their set hours, for example by working overtime, their entitlement does not increase, it remains the same as their contracted hours
- for example, Amir works 30 hours per week, they often carry out 5 hours overtime per week. Amir’s holiday entitlement remains at 5.6 weeks, which equates to 168 hours (30 hours * 5.6) holiday entitlement per year
- to take his overtime into account, when Amir takes annual leave, their holiday pay will be calculated as their average pay, looking back over the last 104 weeks to obtain a 52-week reference period.
Workers without a set number of hours per week / month in a contract (irregular-hour (IR) worker)
If you are processing holiday pay and entitlement to a worker without a set number of hours set out in a contract:
- for holiday years prior to 1 April 2024, these workers are entitled to 5.6 weeks annual leave entitlement per year
- from holiday years starting on or after 1 April 2024), they will accrue holiday entitlement per hour worked
- they are entitled to a prorated amount of 5.6 weeks annual leave entitlement per year
- you can calculate this in one of two ways:
- calculate 12.07% of the total hours worked per pay period
- this gives you their holiday entitlement in hours they have accrued
- this is built up in a ‘bank’
- when they come to take this annual leave, their holiday pay will be calculated as average pay, looking back over the last 104 weeks to obtain a 52-week reference period
- calculate 12.07% of the total gross pay received per pay period
- this is paid to the employee within that pay period
- this is what is now known as ‘rolled-up’ holiday pay
- the employee still must have the leave (which more often than not, they will do so by not accepting a shift, therefore, not working), but they have already been paid for the leave as they accrued it.
- calculate 12.07% of the total hours worked per pay period
Workers who work part of the year (part-year (PY) worker)
If you are processing holiday pay and entitlement to a worker who only works part of the year, as set out in a contract:
- for holiday years prior to 1 April 2024, these workers are entitled to 5.6 weeks annual leave entitlement per year
- from holiday years starting on or after 1 April 2024), they will accrue holiday entitlement per hour worked
- they are entitled to a prorated amount of 5.6 weeks annual leave entitlement per year
- you can calculate this in one of two ways:
- calculate 12.07% of the total hours worked per pay period
- this gives you their holiday entitlement in hours they have accrued
- this is built up in a ‘bank’
- when they come to take this annual leave, their holiday pay will be calculated as average pay, looking back over the last 104 weeks to obtain a 52-week reference period.
- calculate 12.07% of the total gross pay received per pay period
- this is paid to the employee within that pay period
- this is what is now known as ‘rolled-up’ holiday pay
- the employee still must have the leave (which often means, they will do so by not accepting a shift, therefore, not working), but they have already been paid for the leave as they accrued it.
- calculate 12.07% of the total hours worked per pay period
NB. If workers are provided with more then 5.6 annual leave entitlement, the relevant percentage calculation will need to be amended. For example: 5.6 weeks holiday / 46.4 (remaining weeks in the year) * 100 = 12.07%
The below flowchart can help you to determine which category of worker you are reviewing, which will allow you to determine how to calculate holiday pay and entitlement for them.
Information provided in this news article may be subject to change. Please make note of the date of publication to ensure that you are viewing up to date information.