Among the most frequent questions we get asked is how to understand holiday entitlement for those who are not on a regular 9 – 5 five day week. We help you see the wood for the trees.
The basic case- regular hours, five days a week
The minimum statutory holiday entitlement is 5.6 weeks. Keeping that in mind helps. For the 5 day a week employee that is 28 days which, crucially, includes Bank Holidays. If an employee works a Bank Holiday then it can be taken at another time. If they normally work on that day, but take the holiday, then it counts as a holiday-day.
Regular part-time hours
If the employee works 2 days a week (a) or, say, 25 hours a week (b) then their holiday entitlement is:
a) 5.6 weeks * 2 days = 11.2 days which should be rounded to 12 days (but can be converted to hours). This includes bank holidays if they would normally be worked.
b) 5.6 weeks * 25 hours = 140 hours. Here you may prefer to count holiday entitlement in hours rather than days, but you should include the hours for Bank Holidays where they would normally be worked.
Irregular part-time hours
Technically the correct approach is to store holidays proportionate to the hours worked. So for every hour worked 12.07% of those hours (equivalent to 5.6 weeks holiday per year) should be put in to a store or “bank” and paid when holiday is taken. Administratively that is a challenge.
What the majority of employers do in these circumstances is to “roll up” the holiday by adding 12.07% to the pay (rather than accumulating the hours). Employees are deemed to take holiday when they are not working. In theory this is incorrect as holidays should not be paid in lieu – which is what this solution effectively does. In practice it is rarely challenged.
However ACAS states (in advice to employees):
“You must get your holiday pay when you take your annual leave. If your employer is spreading your holiday pay over the year by adding an amount on top of your hourly rate, this is known as ‘rolled-up’ holiday pay and your employer should not do this.”
The relevant word here is, perhaps, “should”. If you accept this as an obligation you will roll up hours, not pay.
Administratively there is pressure to move towards salaries with no overtime payments or to overtime without premium payments, which simplifies holiday entitlement.
Summary
This blog covers simply the main options employers are likely to face. Technically there is some over-simplification. For example some aspects of holiday entitlement (and holiday pay) apply to the first 4 weeks of holiday only.
Employers whose circumstances are not covered here or who wish to keep holiday pay to the absolute minimum (despite any additional administrative costs) should seek further advice from Employer Solutions.
There are also issues surrounding accrual of holiday while on leave, service related additional holidays and commission payments, which are not covered here. Please contact us for further details if any of these apply to you or if you have difficulty interpreting the advice in this blog.
Holidays were simpler when left to determination by employers. Unfortunately it is doubtful that we will every return to employers having such discretion (even when we leave the EU).
Malcolm Martin FCIPD
Author Human Resource Practice