IRIS Elements: Holiday Entitlement & Holiday Pay

UPDATE: The content of this blog has been updated following legislative changes around holiday pay calculations for irregular hours staff that came into play on 1 January 2024.

What is holiday entitlement in the UK?

All employees in the UK are entitled to time off. This is known as their holiday entitlement.

Currently, UK law states that an employee's holiday entitlement is 5.6 weeks per year if they are full-time. This means someone working five days per week is entitled to 28 days of paid holiday each year.

Holiday entitlement for part-time workers is based on the hours they work but is the same 5.6 weeks per year as for full-time employees. So, a part-time employee working two days per week has a holiday entitlement of 11.2 days per year.

You cannot round down an employee's holiday entitlement, but you can round it up. For example, if an employee is entitled to 15.6 days holiday, you cannot round it down to 15 days, but you may choose to round it up to 16 days. You cannot round down an employee’s holiday entitlement, but you can round it up. For example if an employee is entitled to 15.6 days holiday, you cannot round it down to 15 days, but you may choose to round it up to 16 days.

The 5.6 week entitlement is the statutory minimum and can include bank holidays. In an employment contract or staff handbook, you can give your staff more than the minimum but not less.

Calculating holiday entitlement

If an employee works 5 days a week, their holiday entitlement will be 5.6 weeks, or 28 days in any 12 month period. However, if you have employees who work on different part-time patterns, here is how you can calculate their entitlement:

Annual leave for part-time staff

For an employee who works full days but less than 5 per week, simply multiply the number of days they work by 5.6 to give you their holiday entitlement.

Example: 3 days per week x 5.6 = 16.8 days leave per year

For an employee who does not work full days but has a set number of hours each week, simply multiply these hours by 5.6 to give you a leave entitlement.

Example: 21 hours per week x 5.6 = 117.6 hours leave per year

Annual leave for casual and irregular staff

The calculations of holiday pay for employees working casual or irregular hours has seen lots of change over recent years. The reason for this complication is that by nature, irregular hours workers do not receive the same amount of pay every week or month, as their hours worked change.

Pre-April 2020 - employers were required to look back to the last 12 weeks employees worked and earned pay to establish a reference period for their average weekly wage. They would look back as far as necessary to get 12 weeks' worth of pay information.

April 2020 – this all changed, and the reference period was increased to 52 weeks rather than 12 weeks. The idea is that this would better spread out any seasonality of pay. There was also a cap of 2 years on the time they had to go back to get these 52 weeks of pay data.

January 2024 – following several high-profile tribunal cases such as Harpurs and Brazel, a government consultation led to an announcement on November 2023 that the calculation of holiday pay for irregular hours staff is to change again., a government consultation lead to an announcement on November 2023, that the calculation of holiday pay for irregular hours staff is to change again.

• 52 week average is no longer required

• 12.07% of the hours worked in a pay period (their normal pay period) as per standard hours workersas per standard hours workers

• Employers can continue to calculate on an average of the last 52 weeks, but by using 12.07% of the previous pay period, it will ensure holiday pay is a more accurate reflection of the pay rate at that particular time

• This applies to employees with irregular hours, part-time workers and those on zero hours contracts

• New categories – 'irregular hours workers' for those whose contractual hours are wholly or mostly variable and 'part-year workers' who are employees whose contracted hours require them to work part of the year only, such as term-time workers. contracted hours require them to work part of the year only, such as term-time workers.

Need more help with these calculations? You'll find our guide to calculating holiday pay very helpful.

Holiday pay entitlement

As an employer, you must ensure employees are paid in full during their holidays.

Even though a full-time employee is entitled to 5.6 weeks holiday per year, this is effectively accrued at just over two days per month. Therefore, if an employee leaves part way through the year having taken more holidays than they have accrued up to that point, you are entitled to reclaim the monetary value of any overtaken holiday.

Similarly, if an employee leaves part way through a year, you must pay them for any accrued holidays they have not taken.

To work out any holiday pay you may owe to your employee or that your employee may owe to you, multiply the total holiday entitlement for the year by the percentage of the year that has elapsed at the point of leaving. Take this figure and subtract the amount of holiday already taken to find the amount of leave the employee is entitled to.

If the number is positive, you should pay the employee what they are owed; if it is negative, you can reclaim what you are owed.

Notice for taking holidays

You can decide when an employee can take their holidays as long as you allow them to take the statutory minimum leave each year or the contractual entitlement you have set out. Employees begin accruing their holidays as soon as they start work, and any accrual continues through any maternity, paternity or adoption leave.

Employees must give notice if they want to take a holiday, and you can choose whether to approve the request. Generally, the notice given should be two times the length of the proposed holiday. For example, four weeks' notice for a 2-week holiday. be two times the length of the proposed holiday. For example, 4 weeks’ notice for a 2 week holiday.

Managing holiday entitlement

It is your responsibility to keep track of when your employees are taking holidays to ensure that all employees take at least the minimum entitlement each year. It is also in the best interests of your business to ensure holidays do not leave you with staff shortages.

If you have a growing number of employees, managing their holiday entitlement can become complex and time-consuming. There is a lot to calculate and manage, particularly if people are joining and leaving at different times throughout the year, if hours change, or if people are on different contracts.If you have a growing number of employees, then managing their holiday entitlement can become complex and time consuming. There is a lot to calculate and manage, particularly if people are joining and leaving at different times throughout the year, if hours change, or if people are on different contracts.

That's where HR Software can help. Managing your employees' holiday is an essential part of running a business, and IRIS could help you save crucial administration time and relieve logistical headaches.