Getting holiday pay wrong can lead to costly errors and unhappy staff. This guide highlights your legal requirements and how to remain compliant across many working arrangements.
To ensure fairness and transparency, holiday entitlement should be clearly outlined in the employment contract, with employers being responsible for ensuring compliant implementation.
The minimum entitlement for almost all employees is 5.6 weeks of paid holiday per year. This minimum entitlement equates to 28 days in the holiday year, including statutory bank holidays.
The 5.6 weeks applies to full time and part time employees, the latter pro-rata based on the number of days, or hours they work each week.
From the first day of employment, leave accrues at a rate of one-twelfth of the annual entitlement per month, accruing 2.33 days per month thereafter. The employee may take holiday during the early months of employment, but payment for leave is at the employer’s discretion.
Holiday entitlement for irregular-hours and part-year employees accrues at a rate of 12.07% of actual hours worked at the end of each pay period. This is rounded up to the nearest hour if the entitlement is 0.5 of an hour or more.
For any employees who cannot take their entitlement within the holiday year, for example being on Maternity or Sick, they can carry it over to the next year.
There is a maximum number of days allowed, and criteria that needs to be met for individual employees.
Leave entitlement can be carried over if any of the following apply:
• they did not receive holiday pay that they were entitled to for working irregular hours (also known as rolled up holiday pay).
• they were not given reasonable opportunity to take leave.
• they were not told that they would lose their leave if they did not take it.
If an employee leaves during the holiday year, without taking their full entitlement, they should be paid it in their final salary.
Ultimately, ensuring holiday entitlement and pay are managed correctly is a key employer responsibility. Regularly reviewing your policies and processes will help maintain compliance, reduce risk, and support a fair and consistent approach for all employees.
Contact Maryann Hunter for more information by emailing payroll@randall-payne.co.uk or call 01242 776000.