In the UK, all employees are entitled to annual paid leave. This gives employees a chance to rest and recharge, enabling them to return to work refreshed and ready.
In this blog, Natural HR looks at how to calculate holiday pay and answers all the questions we are most frequently asked about holiday pay and overtime. Whether you are an employee who wants to understand what you can expect from your annual leave, or an employer responsible for allocating an entire team’s holiday leave, this blog is for you.
How to Calculate Holiday Pay
When calculating holiday pay, you will use a week, starting on a Sunday and ending on a Saturday. Calculate your holiday pay from the last full week that you worked in this format.
To calculate annual leave entitlement, you will next need to look at the type of contact in question, as leave entitlement differs between contract types. Here is how to calculate leave entitlement according to your contract:
Calculating Fixed Hour Holiday Pay
Whether you are a full-time employee or a part-time one, if your working hours do not vary, your holiday pay will be calculated using your usual pay rate. This means that if you work 35 hours a week and get paid £350 a week, you should be paid £350 for your week of holiday. If you take three days of leave, you should be paid £150, etc.
Calculating No Fixed Hour Holiday Pay
If you do not have regular or fixed hours, your holiday pay will be based on the average pay you received over the previous 52 weeks. If you did not receive payment for any of the 52 weeks, use the previous week instead. Similarly, if you were sick for a week and received only Statutory Sick Pay, use another week where you received your usual pay.
You should only count back as far as needed to get 52 weeks of your usual pay, but it is important to find weeks in which you received your normal pay, as holiday pay should be the same as if you were working. If necessary, you can look at the pay you got over the previous 104 weeks, but no further.
Pro rata annual leave is calculated based on the number of hours an employee works and how many days a week. If you have not yet worked for a full 52 weeks, your employer will use the weeks that you have worked to find the average pay.
What Are The Benefits of Offering Holiday Pay?
Offering holiday pay can have many benefits for your business and its employees. The best holiday pay benefits are:
- Increased employee productivity and motivation
- Attractive for top talent
- Reduced employee absences
- Reduced employee burnout
- Increased employee retention
How Many Holidays Are You Entitled to in the UK?
The statutory minimum holiday entitlement in the UK for full-time and part-time employees is 5.6 weeks, or 28 days. This includes bank and public holidays. However, companies differ in their leave allowance, and your organisation may offer more annual leave. It is best to check your contract or speak with your HR person before booking any leave so that you have a complete understanding of what you can expect.
It is also important to note that, in the UK, employers are not allowed to round down holiday entitlement. So if your entitlement is calculated to be a decimal, it should be rounded up, not down.
What is the Average UK Leave
As mentioned above, companies can offer more leave than legally required, and often to. In the UK, the average holiday allowance is 33.5 days, including public and bank holidays. This is a week above the statutory minimum holiday entitlement.
How Do Overtime, Commission and Bonuses Affect Holiday Pay?
If you are regularly paid a commission, or overtime, or receive regular bonuses for your work, your employer must include these payments in at least four weeks of your paid holiday. Some employers will include these extras in your full 5.6 weeks’ paid holiday, but this is not legally required. This is because the laws on this matter are based on the EU Working Time Directive, which is for four weeks’ holiday only.
Need Help Keeping Track?
It can be challenging to keep track of all of this information for just one employee. When considering an entire business and all of its employees, efficient absence management becomes crucial.
If your business could use some assistance in this or any other HR-related area, get in touch with us today at +44 (0)121 663 1500, or contact us here.