The Simple Holiday Pay Calculator by MAD-HR
We have created this easy-to-use holiday entitlement calculator to make it as simple as possible for UK employers to work out employee holiday pay. To learn more about how the calculations are made, please read the article below the calculator on this page.
It is important to note, this calculator can be used for standard holiday calculations only. This calculator cannot be used for those employees who have variable pay or work irregular hours. The rules around average holiday calculations are changing from January 2024 – please ensure to visit our blog about [Average Holiday Pay] for details of how to manage these changes and to ensure you are calculating holiday correctly.
Explanation of calculator terms
- Choose the working unit
Do you need to work out an annual leave allowance in days or hours? If your employee is working part-time, it may be more useful to select ‘hours’. The figures will need to be inserted in the format of the working unit. - How many days/hours are in a full-time working week?
How many days/hours a week do your full-time employees work? This figure should be stated on their contract of employment. If you are calculating the annual leave entitlement for a part-time employee, you are still required to fill in this part of the calculator by inserting how many days/hours they would work if they were full-time. - How many days/hours are there in a full-time holiday allowance, excluding Bank Holidays?
The statutory legal minimum requirement is currently 20 days. However, be sure to check their contract of employment for any additional days they may be contractually entitled to. Ensure to convert this figure to hours if required (holiday x hours per day) - How many days/hours a week will this employee work?
The number of days/hours your employee works should be clearly stated on their employment contract. - Pro-rated calculation for starters or leavers during holiday year
Tick this box if you are working out entitlement for an employee who is either starting employment or leaving their job part way through the holiday period defined by your company, or both. If you tick this box an additional box will appear so that you can enter more details. - Include Bank Holidays
Do you want to include Bank Holidays in the total holiday allowance? Remember to then assess how many bank holidays they are entitled to, compared to how many fall on working days and allocate them accordingly – it is best to do this from the beginning so that an employee is fully informed of any adjustments due to bank holidays.
How To Calculate Holiday Pay: A Guide for UK Employers
In the UK, all employees are legally entitled to statutory holiday and pay. For most employees working five days per week, this amounts to 5.6 weeks’ holiday, with a week’s pay for every week of statutory leave taken. However, entitlements vary for new staff, staff who work part-time, or those who do not have fixed hours or pay.
The concept of statutory paid holidays was introduced to the UK workforce as a result of The Working Time Regulations 1998, which implemented the European Working Time Directive into UK law and are still in place post-Brexit (at the time of writing). In fact, before these regulations came into force, employees in the UK had not yet gained the legal right to paid time off! Since then, understanding and calculating holiday pay has become an essential responsibility for employers. However, this process can seem a little intimidating if your business employs staff with varied working hours and pay.
In this comprehensive guide, we will break down the process of how to calculate statutory holiday entitlement and pay.
How to calculate holiday entitlement
Correctly calculating holiday entitlement is crucial in ensuring your employees receive the paid time off that they are legally entitled to. The UK statutory minimum leave entitlement is 5.6 weeks, which equates to 28 days for a full-time worker. This can include the usual eight bank holidays; however, if your business operates on bank holidays, you may wish to ask employees to work these days and instead book annual leave at another time.
Some businesses may, at their own discretion, give their employees more than the statutory minimum. But in this guide, we will focus on statutory holidays only.
To calculate individual entitlement, the following factors must be considered:
- Full or part-time – Full-time employees are entitled to the full statutory 28 days, as a minimum, while part-time workers receive a pro-rated allowance. For example, while a member of staff who works five days per week will be able to take the full 28 days as holiday each year, those who work three days per week will see a reduction in their statutory holiday entitlement.
- Employment duration – The length of time an employee has been with your company can also affect their annual leave. For example, if a member of your staff has been employed for one month, they are entitled to a twelfth of their annual leave. This prevents staff from taking lots of paid time off just after starting at a company. However, if a new employee requests to take more annual leave than they have earned (for example, if they had a holiday booked before they started the job), you may grant this at your discretion.
How to calculate holiday pay
Holiday pay calculation varies based on your remuneration structure. Here are a few common distinctions:
- Basic salary – If your employee has a fixed salary, calculating holiday pay is straightforward. It’s equal to their regular daily rate.
- Variable pay – For employees with variable income, including commissions, overtime or bonuses, holiday pay should be calculated using an average of their earnings over the past 52 weeks (if they have not worked for 52 weeks, use however many weeks’ data you have. If they have been employed for less than a week, you will need to make a calculation based on the worker’s pay, pay already received by the worker, and the pay of other workers in a comparable role). You must include overtime, commission, or bonuses for the first four weeks of your employees’ holiday pay. The remaining eight days’ holiday pay can be paid at the basic rate.
- Irregular/zero-hours contracts – For those on zero-hours contracts, use a 52-week average for holiday pay calculations.
Regardless of an employee’s working pattern, they should receive the same amount of pay for statutory holiday as they should when working. So, if an employee works a 37-hour week and receives £500 per week, they should receive £500 for a week’s holiday.
It is important to note that holiday calculations for those who receive variable pay or work irregular hours are changing from January 2024. Please visit our blog here for more details on how to manage these changes.
Pro Rata Holiday Calculator
To ensure fair treatment, entitlement for new employees or those with a working pattern that differs from fixed, full-time work must be calculated on a pro-rata basis. This helps determine the holiday allowance based on the number of hours or days an employee works per week, ensuring they receive a proportional share of annual leave and pay.
How to work out pro-rata holiday entitlement
As the full amount of statutory holiday per year is 5.6 weeks (28 days), when calculating the entitlement for a part-time worker you should multiply the number of days worked per week by 5.6.
For example, an employee working a three-day week would be entitled to 16.8 days of statutory holiday per year. This is because three multiplied by 5.6 is 16.8. You must ensure you allocate the bank holidays accordingly to ensure they do not exceed their entitlement.
Those with irregular hours or who are on a zero-hours contract may, for example, work 15 hours over three days one week, and 20 hours over four days the next. Because of this irregular pattern, it is best to take an average of their days worked over the past 52 weeks, or however many weeks they have worked (if less than 52). In cases of absence, you may go back as 104 weeks if required to ensure you capture the full 52 weeks. As mentioned above, the rules are changing and you should visit our blog for more information.
“I recommend MAD-HR.”
“Professionalism and discretion were always at the forefront of the work.” Read the full review
Employees who are leaving part-way through the holiday year
If an employee is leaving part-way through the holiday year, the amount of holiday they have taken so far that year will need to be taken into consideration.
For example, if they leave halfway through the year and have not used half of their statutory holiday allowance, they must be paid whatever remains of that half by their employer. This is the case even when the worker is dismissed. If they have taken more than half of their allowance, then it can be agreed in writing that the employer will take any excess from the employee’s final pay packet. Your contract of employment should state that you reserve the right to make a deduction from their final pay.
Get holiday entitlement and pay right
Calculating holiday pay and entitlement is a fundamental part of effectively managing your employees in accordance with employment law. If an employee is not receiving the correct amount of holiday pay, they may submit a claim to an employment tribunal within three months minus one day from the date of the most recent wrong holiday payment. Therefore, it is best to get an efficient system in place to prevent this from happening.
If you need any more support with compliance, don’t hesitate to get in touch with our friendly team at MAD-HR.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact us.
There may be occasions where the articles contain links to external websites. We have no control over the nature, content and availability of those sites. The inclusion of such links does imply a recommendation or endorse the views expressed within them.