Holiday management can be a real headache, particularly when it crosses over with other forms of leave, such as sick leave or parental leave. A record should be kept of each employee’s leave and most of our clients use an excel spreadsheet to do this. It can simplify this process somewhat if you make your holiday year the same as the financial year.
Accrued employees’ holiday provision is now required in company accounts as a liability. This is the amount of accrued holiday that each employee has leftover, unused, at the company year-end. We will make sure this is included in the right place in your accounts, so please ensure you are keeping accurate records.
Calculating holiday pay
Almost all workers are legally entitled to 5.6 weeks paid holiday per year (known as statutory leave entitlement or annual leave). An employer can include bank holidays as part of statutory annual leave or in addition. Part time workers are entitled to the same amount of holiday (pro-rata) as full-time colleagues. Calculate statutory holiday entitlement in days or hours for a full leave year or work out the holiday that someone is entitled to when they start or leave a job part way through a leave year here.
How does holiday accrue?
Statutory holiday entitlement starts to build up – or accrue – from the first day of employment. It accrues monthly in proportion to the annual entitlement.
For example, a full-time worker in the ninth month of employment would have built up 9/12ths (or three-quarters) of annual entitlement. The statutory annual entitlement for a typical five-days-a-week job is 28 days, so in this case the worker would have accrued 28 x 9/12 = 21 days.
When employees are on sick leave during this period, they continue to accrue holiday at the normal rate. And if the employee can’t take this leave during their first year because of sickness absence, then the employer must let all or some of it be carried over to the next year.
In the second year of employment, workers are entitled to all their leave as soon as the new holiday year starts. Employers may choose when the leave is taken and for how long – for example, a two-week shutdown around Christmas and New Year.
An employer can choose to offer more leave than the legal minimum. They don’t have to apply all the rules that apply to statutory leave to the extra leave. For example, a worker might need to be employed for a certain amount of time before they become entitled to it.
What about maternity leave?
The employee continues to accrue statutory minimum holiday and any additional contractual holiday entitlement whilst on maternity leave. The holiday can’t be used during the actual maternity leave, though arrangements could be made to add the leave on to the beginning or end of the maternity leave period. The same goes for paternity leave.
What if the employee leaves?
At the end of employment, employees are entitled to a payment for any unused holiday that has been accrued. Conversely, a contract of employment could make a provision that workers terminating their employment repay the employer for any leave taken beyond the amount that has been accrued.
If you would like Pillow May to help you with your payroll and employee’s holiday pay, please contact our Payroll Manager Ruth Phelps.