Holiday Entitlement

If you have ever left an employer finding your Holiday Entitlement pay calculation to be lower than you expected, or wondered how prorated Holiday Entitlement works, then our information below will help you to understand the set formulas and rules employers use to calculate Holiday Entitlement.

Q. How do I find out my Holiday Entitlement?

It’s in your employment contract. The employer-employee relationship is usually governed by a contract, which is then reinforced by specific laws on employers’ obligations to their employees, and employees’ obligations to their employers.

Q.   How is Annual Leave calculated?

Most people are aware that they are entitled to 5.6 weeks’ or 28 days annual leave under the Working Time Regulations 1998 (WTR). This is reduced for part-time workers, although it can still be expressed as 5.6 weeks. For example, if you worked three days per week, you would be entitled to 16.8 days’ annual leave (3 x 5.6). Your employer can choose to round up that figure but they cannot round it down.

Fewer people know how much annual leave they are entitled to at a given point in the year. Some contracts will refer to a leave year in writing. For example, yours might specify that it starts each year on 1stJanuary. If your contract does not include anything about it, your leave year will start on the day you started your employment (or 1stOctober if you have been employed on the same contract since 1998).

Q. Why is Holiday Entitlement less in my first year of employment?

Shortly before the Working Time Regulations (WTR) came into force, many employers were concerned that employees would be able to take their whole annual leave entitlement (e.g. 28 days for a full-time employee) during their first few weeks of employment. To put a stop to the potential abuse of annual leave, accrual provisions were included in the WTR.

These accrual provisions mean that an employee’s annual leave entitlement accrues at the rate of 1/12 of a full year’s entitlement at the beginning of each month. It is usually more sensible to consider the beginning of the month as being the date on which you started your employment. So, if you started on 25thMarch, your entitlement would increase on the 25thof each month.

To spare you the maths, for a full time employee, their annual leave entitlement in their first month of the first year of employment would be 2.33. To make things slightly simpler, the WTR provides that fractions should be rounded up to a half-day (if it is less than a half-day) and to a whole day (if it is more than a half-day). Using our example, the employee’s entitlement becomes thus becomes 2.5 days.

The same applies to a part-time employee. Using our example of an employee working a three-day week, their entitlement would be 1.5 days (16.8 ÷ 12, rounded up to a half-day).

Q. What happens to Holiday Entitlement after my first year of employment?

  • Things get a little easier if you have been with the same employer for more than one year.

The WTR has no provisions relating to accrual of holiday entitlement, therefore the whole entitlement is available at the start of the leave year.

  • This does not necessarily mean that you can take it all at once, though, since many employers will limit the amount of holiday that can be taken at once in your contract or handbook.

Q. What happens to Holiday Entitlement if I join part-way through the year?

  • Your holiday entitlement will accrue in the same way as above. For example, if you start in October of a leave year that begins in January, your annual leave entitlement will be 7 days.

An important thing to note is that, in your first year of employment, you are subject to the accrual provisions irrespective of whether your employer’s leave year is reset. Using the example above, you would continue to accrue annual leave at the same rate.

Therefore, for example, if you started working full-time for an employer in October 2018, and your employer’s leave year reset in January 2019, you would not be entitled to the full 28 days beginning in January 2019. Instead you would continue to accrue annual leave at the usual rate of 1/12 of a full year’s entitlement.

Working from the example above, please see the below table as a guide:

 

Month of Employment

Annual Leave Entitlement

October 2018

(first month of employment)

2.5

November 2018

5

December 2018

7

January 2019

(start of your employer’s leave year)

2.5

February 2019

5

March 2019

7

April 2019

9.5

May 2019

12

June 2019

14

July 2019

16.5

August 2019

19

September 2019

21

October 2019

23.5

November 2019

26

December 2019

28

January 2020

(start of your employer’s leave year)

28

It goes without saying that your holiday entitlement will be reduced by any holiday which you take, and then topped up at the start of each month as it accrues.

What might not go without saying is that an employee cannot be entitled to more than 28 days’ statutory leave in a single leave year. This can be enhanced at your employer’s discretion, and many employers often choose to reward long-serving employees with more annual leave. However, this statutory limit, together with the statutory restriction from carrying over leave, means that the leave entitlement resets at the beginning of your employer’s leave year. Unlike all your colleagues who have been employed for more than one year, however, your leave will continue to accrue at the usual rate.

Q. How much Holiday Entitlement will I be entitled to when leaving my job?

Did you know there is a set formula to work out the pay you would have received, had you taken a period of holiday?

Whether you are dismissed or you resign, you are entitled to be paid for any holiday you have not taken, in accordance with regulation 14 of the WTR. However, it is not as simple as just claiming the full 28 days/5.6 weeks’ entitlement or even just claiming for holiday you had not taken.

The formula is:

(A x B) – C

  • ‘A’ is the period of statutory leave to which you would have been entitled for the whole of the leave year in which employment ends. Remember, if you are still in your first year of employment, this is not automatically 28 days or 5.6 weeks.
  • ‘B’ is the proportion of your leave year which expired before the termination date. This is expressed as a fraction, for example: 150/365.
  • ‘C’ is the period of leave which you had taken between the start of the leave year and the termination date.

For example, let’s say you have been working full-time for your employer for three years, and your employer’s leave year runs from 1stJanuary to 31stDecember. You leave your employment on 28thSeptember, which is 271 days into your employer’s leave year. Between the 1stJanuary (i.e. when your employer’s leave year began) and 28thSeptember (i.e. when you left employment), you had taken 13 days’ leave. Because you are full-time, 13 days amounts to 2.6 weeks (2 weeks and 3 days) of your 5.6 week entitlement. The calculation will be as follows:

A = 5.6, B = , C = 2.6

(5.6 x  ) – 2.6 = 1.558

Based on the above example, you would therefore be entitled to 1.558 times your usual week’s pay.

Q. How much Holiday Entitlement will I be entitled to - if I leave my employment in the first year?

The calculation for working out your entitlement to holiday pay if you left employment in your first year is largely the same calculationas above. The part to watch out for is working out your correct annual leave entitlement, which hopefully will be easier thanks to the table above. Just remember that your employer’s leave year may start from a different date!

As an example, we will say that you have been working full-time for your employer for 6 months and your employer’s leave year runs from 1st January to 31stDecember. You leave employment on 12thJuly or 193 days into the leave year. During that leave year, you had taken 3 days of your 16.5 days’ entitlement (see the above table). To make things easier for this example, we will calculate the formula using days instead of weeks.

A = 16.5, B = , C = 3

(16.5 x   ) – 3 = 5.72

Based on this example, you would be entitled to 5.72 days’ holiday pay on leaving your employment. This number does not need to be rounded up or rounded down.