Getting It Right With Annual Leave

Quick Summary

• Employees are entitled to 5.6 weeks of statutory paid holiday annually under the Working Time Regulations 1998.
• Holiday entitlement accrues during sick leave, maternity leave, paternity leave, adoption leave, and shared parental leave.
• Part-time workers receive a proportionate amount of holiday based on their working hours.
• For leave years beginning on or after 1 April 2024, new rules apply for irregular hours and part-year workers, allowing them to accrue holiday at 12.07% of hours worked in a pay period.
• Holiday carryover is allowed in certain circumstances: – Maternity leave: All 5.6 weeks can be carried over. – Long-term sickness: Up to 4 weeks can be carried over, to be used within 18 months. – Employer’s failure to allow or inform about holiday use: Up to 4 weeks can be carried over.
• Employers should encourage employees to take their holiday to avoid carryover issues.

Full Article

Under the Working Time Regulations 1998 employees are entitled to 5.6 weeks of statutory paid holiday a year. This is accrued from the day an employee starts working for you including when they are on sick leave, maternity leave, paternity leave, adoption leave or shared parental leave and also during any probationary period. Essentially, if the contract of employment is current and effective then annual leave will accrue,
Employers have a legal responsibility to make sure employees can take the holiday that they are entitled to.

Calculating Annual Leave

Part-time employees are still entitled to 5.6 weeks’ statutory paid holiday, but the entitlement will be in proportion to the hours they work. In summary, if an employee is a regular worker, simply multiply the number of days they work by their holiday entitlement in weeks (5.6 days statutory minimum) 3 days at work. Multiply 3 by 5.6 = 16.8 days (round up to 17)

If a part-time worker does multiple days but different hours on those days.

For example:

• Monday – 4 hours
• Tuesday – 4 hours
• Wednesday – 6 hours

You have two options:

Option 1 – Convert the annual leave into hours

14 hour working week, multiplied by 5.6 = 78.4 (78.5 round up) hours annual leave. Deduct the hours as appropriate for when annual leave is taken.

Option 2 – Use the same formula to establish the annual leave in days (5.6 * 3 = 16.8). If the employee only takes full weeks annual leave there will be no issues, however if they decided to take individual days there may be discrepancies. The monetary value of the annual leave day taken will equal their week’s pay divided by the days worked in that week. Therefore, someone may be at a monetary advantage by only taking annual leave on their shorter hour days and will have substantially more time off by taking annual leave only on their longer days.

Part Year Workers and Irregular Hours

There are new rules from 1 April 2024 which will apply to irregular hours workers and part-year workers whose leave year began on or after 1 April 2024. As an employer, you may need to update employment contracts if these new rules apply to your workers. However, it is worth bearing in mind that where leave years commenced before 31 March 2024, that you will not need to make any changes to the new rules until the new leave year commences.

Under the new rules, irregular hours workers and part-year workers ‘accrue’ (build up) holiday:

• at 12.07% of the hours they work in a pay period
• on the last day of the pay period

A pay period is how often someone gets paid. i.e. monthly.

Key Notes:

• Entitlement is up to, and not more than, 5.6 weeks (if based on the statutory minimum).

• The amount of leave depends on how often the employees get paid (the “pay period”) and how many hours worked in that pay period.

• The entitlement is 12.07% of the hours worked in a pay period which is to be rounded up to the nearest hour of 0.5 of an hour or more. (calculated at hours, multiplied by 12.07/100) The 12.07 per cent represents holiday expressed as a percentage of working time, as the minimum holiday allowance is 5.6 weeks, which leaves 46.4 working weeks in a year (5.6 is 12.07 per cent of 46.4).(N.B the 12.07% is based on the statutory minimum holiday entitlement of 5.6 weeks. If a worker’s contract provides more than the statutory minimum, you will need to adjust this percentage. (29 days = 12.55%, 30 = 13.04% etc.)

• Realistically, if you employ zero-hour workers and they want time off, they will just decline an assignment. Therefore, zero-hour workers will continue to accrue annual leave so you may find yourself paying rolled up holiday pay to workers on a regular basis. The advice here is to ensure that regular communications about taking annual leave are sent out to staff and when requests come in to decline assignments, you can discuss the option of annual leave with the individual.

Carrying Holiday Over

• Employees can carry over some of their statutory 5.6 weeks’ holiday entitlement if there is a relevant agreement that allows it or if an employee is on maternity leave. In the case of maternity leave, then all of their statutory 5.6 weeks holiday entitlement can be carried over as they may not have been able to use it.

• If an employee is on long term sick leave, they can carry over a maximum of 4 weeks’ holiday entitlement but it must be used within 18 months starting from the end of the leave year in which it was accrued.

• An employee can carry over holiday if, as an employer, you do not let them take all of their holiday, you do not encourage them to take it all or if you do not inform an employee that they will lose any holiday that they do not take.

When this applies, an employee can carry over a maximum of 4 weeks’ holiday entitlement – Reminding employees to take holiday, giving them the opportunity to take annual leave and informing them that they will lose it if they do not take it by the end of the holiday year is paramount to avoid this being applicable!

If you require any assistance with calculating leave entitlement for any of your employees, please do not hesitate to contact us here at Tamar HR.

We would love to hear from you!

info@tamarhr.co.uk / 01752 686570