In our experience, holiday pay, who is entitled to it and how it is calculated is often a source of confusion, especially in smaller companies where there is often not a separate HR or payroll department, so here is a quick summary.
Who is entitled to holiday pay?
All workers – including casual, part time and zero hours workers – are entitled to paid holiday. Their entitlement begins to build up as soon as they start their employment for a company.
This depends on the amount they have accrued within the standard company holiday year. All workers are entitled to 28 days holiday per full year worked including Bank Holidays – in England and Wales, there are 8 bank holidays. Part time workers will have their holiday calculated based on the number of days or hours they work each week or month, pro-rata to the minimum 28-day rule. A worker’s holiday entitlement is on their start date within the company’s holiday year.
The holiday entitlement of part time, casual and zero hours workers is based on the average number of hours they have worked during the previous 52 weeks, or as many weeks as they have worked if less than 52 weeks.
What about ‘in advance’ holidays?
This depends on your company’s policies. The same applies to whether the employee needs to have worked for enough time to have accrued the amount of holiday they want to take.
What about untaken holidays?
Employers cannot pay for holiday which has not been taken during the holiday year – except for when an employee leaves and there is some untaken holiday. However, if your company policy states that untaken holiday from one year can be carried over into the next year, that is fine?
Holiday during maternity leave
Employees on maternity leave continue to build up holiday entitlement and cannot be paid for this during their period of maternity leave as their maternity leave and maternity pay would cease. Once they have agreed a date to return to work, they can also agree when they can take the holiday they have accrued.
If the employee has been on maternity leave for a full year, they will have 5.6 weeks of holiday to take (including Bank Holidays) if they work full time, or a pro-rata amount if they work part-time.
If they have only been away for 6 months, they will only have half of their holiday entitlement to take and it may be agreed that the full entitlement can be taken within the remaining six months rather than delaying their return to work.
As Outsourced Payroll Providers, we do all the calculating for you
A key part of processing payroll is calculating the pay due for holiday entitlement when an employee leaves and calculating the holiday entitlement for a new employee. As outsourced payroll providers, we also calculate the holiday entitlement for all your employees, including those workers working irregular hours. In this way, you as the employer will know how much paid time your employees can take off as holiday, at all times.