It’s been estimated that in the UK 1.8 million people are not receiving the correct holiday pay resulting in an estimated £1.8 billion of unclaimed holiday each year.  

Under UK legislation, every hour worked by a worker or employee accrues an entitlement to paid time off, and nearly all workers are entitled to a minimum of 5.6 weeks’ paid holiday each year (calculated pro rata for those who work part time). The only exclusion is where an individual is genuinely self-employed. 

Calculating holiday for your workers can be complicated and there are many misconceptions when it comes to holiday pay for those individuals that are not employees, for example, believing that that zero-hours workers are not entitled to holiday pay (this is not true!) 

If you are in a situation where the majority of your business is made up of full-time or part-time, permanent employees that are working fixed hours, have fixed pay and receive the same pay even when they are on holiday then holiday calculations could not be more straight forward. As an example, your full-time employees receive 28 days annual leave per calendar year and a part time worker who works 3 days a week receives 16.8 days. However, it becomes more complex when you have individuals who do not have regular hours or do not receive the same pay each week or month.   

So, are you getting it right when it comes to calculating holiday for workers in your business? In short, the amount of pay that a worker receives for the holiday they take depends on the amount of hours they work and how they are paid for those hours. The principle is that pay received by a worker while they are on holiday should reflect what they would have earned if they had been at work. 

As a result of the Government campaign, ‘It comes with the job’, it’s likely that workers will become more likely to challenge their employers as they become much more informed of their rights when it comes to holiday pay and entitlement. It’s important that business owners get this right. 

As part of the government holiday entitlement campaign, they have released a holiday entitlement calculator which employers can use to calculate holiday entitlement according to the days or hours worked per week, casual or irregular hours, annualised hours, shifts, and compressed hours. The tool will also allow you to calculate holiday based on a full leave year or part leave year (for example when an individual joins your business part way through the holiday year or leaves before the holiday year is complete) 

A holiday pay calculator is a good short-term solution for calculating holiday entitlements. However, a longer term, less time consuming and more consistent solution is to use HR software which will calculate holiday entitlement for you. This means that if you have diverse working patterns in your business (for example, part time, irregular or variable working hours) you can always be confident that your application of holiday entitlement is consistent for everybody.   

Finally, if you haven’t done so recently, we’d recommend that you revisit and review your current Annual Leave Policy to ensure that it is compliant and remember these simple guidelines when it comes to holiday entitlement: 

1. Make it clear to your employees that they have the right to paid annual leave and encourage them to use their holiday entitlement.   

2. You cannot pay outstanding holiday pay when it is considered to be a statutory entitlement, trying to avoid employees taking their holiday entitlement and paying it to them as a lump sum at the end of the year is a no no! 

3. Ensure that your employees understand the rules about unused holiday (for example, if there is the ability to carry holiday forward to the next year and what approvals are required) 

4. Keep records of all holiday (ideally on your HR Software tool) 

5. Have a formal written policy in place which clearly sets out the rules in relation to holiday entitlement and accrual and review it regularly to ensure that it is legally compliant. 

If you need any help or support with your policy documents or ensuring your team are receiving their correct holiday entitlement contact us at Clear Bridge HR today.