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 salary you received over the previous 52 weeks. If you did not receive payment for any of the 52 weeks, use the last 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 income, as holiday pay should be the same as if you were working. If necessary, you can look at the income 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.
Calculating holiday pay for part-time workers or those on zero-hour contracts is made easy with our free online holiday entitlement calculators. Input the necessary information and receive quick and accurate results.
What are the benefits of holiday pay?
Holiday pay has many benefits to both your employees and your company. Holiday pay is best when:
Motivation and increased productivity of employees.
Top talent attracted by attractive compensation.
Employee absences are reduced.
Employee burnout can be reduced.
Employee retention can be improved.
How many holidays are you entitled to in the UK?
In the UK, full-time or part-time workers are entitled to 5.6 weeks of holiday. This is 28 days. This includes public and bank holidays. Nevertheless, leave allowances vary between companies, so your organization may offer you more annual leave. You should check your contract, or talk to your HR person, before booking any holiday. This will ensure that you know what you can expect.
In the UK, employers cannot round down your holiday entitlement. If your holiday entitlement is a decimal number, you should round it up and not down.
How long does the average UK leave last?
As we have already mentioned, employers can and do offer employees more time off than is legally required. In the UK, the average holiday allowance includes public holidays and bank holidays. This is one week more than the minimum statutory holiday entitlement.
How do overtime, commissions, and bonuses affect holiday pay?
Your employer must include any payments you receive for overtime or commissions in your four weeks of paid holidays. These extras may be included in the 5.6 weeks of paid leave, but it is not required by law. The laws are based on the EU Working Time Directive, which only allows for four weeks of holiday.
Need help keeping track?
It isn’t easy to keep track of all this information when you are only managing one employee. Efficient management of absence is crucial when considering the entire company and its employees.