News
Understanding Annual Leave Entitlements: A Guide for Different Worker Categories
16 Sep 2024
Annual Leave Entitlement
Determining a worker’s annual leave entitlement depends on their employment status and the nature of their working hours. Different categories of workers are subject to different rules for calculating holiday pay and entitlement, which ensures compliance with labor laws while addressing the specific circumstances of each worker type. Whether the worker has a set number of hours, works irregular hours, or is employed part of the year, understanding these distinctions is crucial for accurately managing their annual leave. This guide outlines how to assess and calculate holiday pay for each category, ensuring fair and consistent treatment for all employees.
When reviewing annual leave entitlement, we need to determine what category a worker falls into for holiday pay and entitlement purposes. The worker will fall into one of three categories:
- Workers with a set number of hours per week/month in a contract.
- Workers without a set number of hours per week/month in a contract (irregular-hour (IR) workers).
- Workers who work part of the year (part-year (PY) workers).
Workers with a Set Number of Hours per Week/Month in a Contract
If processing holiday pay and entitlement for a worker with a set number of hours in their contract (regardless of overtime):
- They receive a minimum of 5.6 weeks of annual leave entitlement per year. This may increase if the employer offers enhanced annual leave.
- Overtime does not increase holiday entitlement; it remains based on contracted hours. For example, Amir works 30 hours per week and often does 5 hours of overtime. Amir’s entitlement remains 5.6 weeks, which equals 168 hours (30 hours * 5.6) per year.
- When Amir takes leave, holiday pay will be calculated based on their average pay over the last 104 weeks, using a 52-week reference period.
Workers Without a Set Number of Hours per Week/Month in a Contract (Irregular-Hour Workers)
If processing holiday pay and entitlement for a worker without a set number of hours:
- They accrue holiday entitlement per hour worked.
- They are entitled to a prorated amount of 5.6 weeks of leave per year.
You can calculate this in two ways:
12.07% of total hours worked per pay period
This gives their holiday entitlement in accrued hours, which is “banked.”Holiday pay is calculated as average pay, based on the last 104 weeks (using a 52-week reference).
12.07% of total gross pay per pay period
This is paid within the same pay period, known as “rolled-up” holiday pay.The employee must still take leave, typically by not accepting shifts, but they will have already been paid for it.
Workers Who Work Part of the Year (Part-Year Workers)
If processing holiday pay and entitlement for a part-year worker:
- They accrue holiday entitlement per hour worked.
- They are entitled to a prorated amount of 5.6 weeks of leave per year.
You can calculate this in two ways:
12.07% of total hours worked per pay period
- This gives their holiday entitlement in accrued hours, which is “banked.”
- Holiday pay is calculated as average pay, based on the last 104 weeks (using a 52-week reference).
12.07% of total gross pay per pay period
- This is paid within the same pay period, known as “rolled-up” holiday pay.
- The employee must still take leave, often by not accepting shifts, but they will have already been paid for it.
Important Note
If workers are entitled to more than 5.6 weeks of annual leave, the percentage calculation will need to be adjusted. For example: 5.6 weeks / 46.4 remaining weeks in the year * 100 = 12.07%.
The flowchart below can help you determine which category a worker falls into, allowing you to calculate holiday pay and entitlement accurately.
Team members related to this article...
Get in Touch
We love meeting new, exciting businesses. Get in touch with our team to see how we could enhance and protect your financial position.
Or if you’d prefer to speak to someone directly just give us a call on: 08000 664 664 or email: hello@wrpartners.co.uk.
"*" indicates required fields