PAYROLL INSIGHT
Holiday pay calculations
Jill Smith MCIPPdip, CIPP policy manager, covers the basic payroll procedures
W e all love a good holiday but calculating holiday pay has become a minefield due to the complexities and issues. If the employees work a set number of hours and receive a fixed salary, calculating annual leave entitlement and holiday pay is relatively straightforward, but if staff have irregular hours, work overtime, or receive commissions or bonuses then the calculations can become quite tricky. Though my intention is to keep it simple and focus on the basic procedures, the implications of case law cannot be excluded – and they are far from basic. Entitlement Every worker in the United Kingdom is entitled to paid annual leave in addition to the statutory bank holidays. The law setting the UK annual leave entitlement is the Working Time Regulations 1998 (‘the Regulations’). An individual is generally classed as a worker if they have a contract of employment. Currently, workers are entitled to a minimum of 5.6 working weeks paid annual leave per year (known as ‘statutory leave or annual leave') which
equates to 28 days of leave per year for someone who works a five-day week. Part-time workers are entitled to the same amount of holiday (pro rota) as full-time colleagues. ...the implications of case law cannot be excluded – and they are far from basic Workers are entitled to the following types of annual leave: ● a minimum of four weeks of paid annual leave under the Regulations, often referred to as ‘Regulation-13 leave’ ● an additional 1.6 weeks paid annual leave under the Regulations, generally known as ‘additional leave’ ● any additional entitlement provided for in the relevant agreement, often known as ‘contractual leave’. ‘Regulation-13 leave’ and ‘additional leave’ together make up ‘statutory leave’, which is usually included in the annual leave entitlement and will be set out in
an employee’s written contract. However, legally ‘contractual leave’ means any leave in the contract over and above statutory leave. There is no legal right to paid public holidays, but the worker’s contract should state if they are to be paid for these holidays. If paid, they can be counted as part of the statutory 5.6 weeks of holiday, but employers can provide them in addition, if they so choose. Accrual Once an employee starts work, details of holidays and holiday pay entitlement should be provided in the employee’s written contract, or a written statement of employment which is required by law and must be given to employees by the employer no later than two months after the start of employment. An employer must tell their employee the dates of their leave year as soon as they start working, for example, it might run from 1 January to 31 December or it could start from their first day at work. As soon as an employee starts work they will start to accrue leave. The holiday entitlement is not affected by
| Professional in Payroll, Pensions and Reward | July - August 2018 | Issue 42 18
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