Holiday – Entitlement and Pay

How much holiday entitlement and pay an employee or worker is entitled to should be set out in an individual’s contract. The statutory minimum amount of holiday is 5.6 weeks a year (which can include bank and public holidays).

Is holiday pay calculated at 12.07% or at 10.77% percent. Which is correct?

The simple answer is that both are correct depending on what you base the calculation on. If an employee works full-time, the statutory minimum amount of holiday due per annum is 5.6 weeks per year (including bank holidays and other public holidays). In any given year such an employee would expect to have 5.6 weeks of holiday and would work of 46.4 weeks (making a total of 52 weeks in a year).

The employees’ percentage holiday pay is either:-

12.07% of 46.4 weeks  –  (5.6/46.4 *100=12.07%)

10.77% of 52 weeks   –  (5.6/52*100=10.77%)

So the percentage is 10.77% of gross pay including holiday or 12.07% of basic pay before allowing for holiday.

If an individual does not work full time, their holiday entitlement is 5.6 times the number of days they work per week.  For example, if an individual works 2 days a week, they are entitled to 11.2 days holiday per year (2 x 5.6 = 11.2).

If an individual works irregular hours, holiday entitlement needs to be calculated based on the amount of hours worked.  The holiday entitlement of 5.6 weeks is equivalent to 12.07 per cent of hours worked (or just over 7 minutes for each hour worker).  For example, if an individual worked 10 hours, they would be entitled to 72.6 minutes holiday (12.07 per cent x 10 hours = 1.21 hours = 72.6 minutes).

A more detailed explanation of holiday pay entitlement can be found at the following UK government link:-

http://www.nidirect.gov.uk/index/information-and-services/employment/employment-terms-and-conditions/time-off-and-holidays/calculating-holiday-entitlement.htm

It is not permissible under UK employment law to ‘roll up’ holiday pay with an individual’s normal pay.  Therefore, if the contract states that a person’s rate is £1,000 per week then it is assumed that this is the basic and that holiday pay is payable on top of that rate. Where the intention person’s rate is £1,000 per week then it is assumed that this is the basic and that holiday pay is payable on top of that rate. Where the intention is for the gross cost to be £1,000 per week, the contract should state that the basic rate is £892.30 and that the weekly holiday pay element is £107.70.

Furthermore, holiday pay should not be paid on a weekly basis as if it is this would be regarded as ‘rolling up’ holiday pay and an employment tribunal would likely rule that the weekly sum is basic pay and that holiday pay is payable on top of this amount pay.  The recommended approach is therefore to pay the net amount every week and then pay all the holiday pay at the end of the contract or after every few months.  Alternatively, individuals should be advised to take paid leave.