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Calculating annual leave entitlement
Calculating annual leave entitlement
Rebecca Russell avatar
Written by Rebecca Russell
Updated over a week ago

Note: This article will be shortly updated with the recent guidance and legislation on holiday pay and entitlement for irregular workers.

Employees and most workers with fixed hours are entitled to a minimum of 5.6 weeks of annual leave per year. This is usually capped at 28 days paid, however, certain companies may choose to offer additional paid annual leave, known as contractual annual leave.

Employees and most workers with non-fixed, zero or casual hours are entitled to a percentage of annual leave for every hour they work.

Bank Holidays - Paid Vs. Unpaid

Bank Holidays can be included in an employee's 5.6 weeks annual leave entitlement if the employer chooses.

Employees do not need to be paid for Bank Holidays; instead, this is at the discretion of the employer.

Bank Holidays during absences

If an employee is absent on a Bank Holiday, and the Bank Holiday is normally paid, the employee must be given the opportunity to take their entitled day of annual leave at a later date.

A Bank Holiday should not be paid during a period of absence.

Annual leave for part-time workers

Regardless of how many days an employee works, they're entitled to 5.6 weeks annual leave. However, the 5.6 weeks entitlement is multiplied by the number of days worked per week.

The table below shows the minimum paid entitlement an employee with fixed hours should receive:

This should be rounded up to the nearest half-day.

Annual leave for 6 or 7-day workers

If your employee works 6 or 7 days per week, their maximum statutory entitlement per year remains capped at 28 days of statutory paid leave.

Annual leave for casual workers and zero-hour contracts

Employees and workers who don't have a set number of working hours each week are still entitled to 5.6 weeks of annual leave. In the past, ACAS guidance was to calculate 5.6 weeks of annual leave entitlement by calculating 12.07% of any hours worked.

Tip: 12.07% is 5.6 holiday weeks as a percentage of the remaining 46.4 working weeks.

In July 2022, the UK Supreme Court ruled that using 12.07% to calculate holiday entitlement is unlawful. They stated that the employee should receive 5.6 weeks at their average weekly pay based on a 52-week average. For further information about using the 52-week average pay reference period, please refer to this Help Centre article.

However, HMRC, ACAS and the courts have offered no guidance on how to calculate an employee's entitlement in days or hours. Employment lawyers urge employers to consider adjusting employee contracts if possible, to a certain number of days, or hours a week. Otherwise, if this isn't possible, the employer should decide with the employee how their entitlement will be calculated.

It's not recommended but some employers have continued to accrue annual leave using the 12.07% method with an understanding of the risks. While others have taken it to the other extreme by offering each employee 28 days (potentially a larger entitlement than is necessary) and calculating a day's pay as the average weekly pay, divided by the number of typical working days in a week.

PayFit still uses the 12.07% calculation until we have full guidance from the government about how to calculate holiday entitlement for zero-hour employees.

You might be interested to know that the government held two consultations earlier this year, to gather information from employers and agents, about potential solutions to this case law. To date, we have had no response on the consultations. And once we do have a response, it could be some time before legislation is passed and we have enforcing regulations. In the meantime, you could speak with an employment lawyer to understand the best way to accrue holiday entitlement. We do have an employment lawyer that we can recommend, please contact us and we can refer you.

When should annual leave be paid?

Regardless of whether your employee or worker is on fixed hours or a casual contract, they must only be paid holiday pay in two instances:

  • When your employee takes annual leave.

  • When your employee leaves employment.

You can't make regular payments for accrued leave to employees, including those on zero-hour contracts. This is called 'rolled-up holiday pay' and is no longer lawful.

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