As we enter the summer months, many of your employees will be looking forward to enjoying some well-deserved time off. Whether they’re jetting off for some tropical sun, or taking time to rest and relax at home, as HR professionals it’s our job to ensure they receive the correct amount of holiday pay for their period(s) of annual leave.
Here are some tips to ensure you are calculating holiday pay correctly for your employees:
In the UK, full-time employees are legally entitled to 5.6 weeks of paid time off each year. For employees joining or leaving mid-year, this entitlement is pro-rated. The idea of holiday pay is to ensure that employees are not financially impacted during these weeks of annual leave – essentially, they receive the same pay as if they were at work.
Many employees are on a salary or regular hours contract and therefore, receive the same pay each pay period (pay period = how often someone gets paid, for example, weekly or monthly). In this case, when they take a week of annual leave, they will simply continue to receive their usual pay as normal.
Where an employee’s contracted hours are variable (for example a zero-hour contract or shift worker), they are classed as an irregular hours worker. Where an employee is only contracted to work (and get paid for) part of the year and there are periods within that year of at least a week during which they are not required to work, they are classed as a part-year worker.
To calculate holiday pay for these employees, you should take their average pay from the previous 52 weeks (only counting the weeks in which they were paid, counting back to a maximum of 104 weeks). If someone has not yet been employed for 52 weeks, you should look at how many full weeks they have worked for.
For clarity and to avoid claims that holiday pay has not been paid, you should clearly document the breakdown of holiday pay vs. normal pay on the individual’s payslip.
For all employees, at least the first 4 weeks of holiday pay must be calculated based on their ‘normal pay’. Regulations specify that this must include:
For the remaining 1.6 weeks of holiday pay, you have the option to use the employee’s ‘basic’ rate of pay.
For leave years starting on or after 1 April 2024, irregular hours and part-year employees can receive holiday pay as an additional amount in every payslip, rather than only receiving holiday pay when they take annual leave. This is known as rolled-up holiday pay.
If you have decided to use rolled-up holiday pay for your irregular hours and part-year employees, you must:
It can be difficult to keep up with an influx of holiday requests, absences, and payments during summertime. If you need any verbal advice or hands-on support at any time, feel free to get in contact and one of our HR or payroll experts will be happy to help.
