Holiday pay is unique to each company because each firm has their own rules on how many holiday days’ employees get, whether it has to be accrued before being taken and how many days a week their employees work; it all depends on what is written in the contract of employment. Whether or not an employee works bank holidays also affects the way holiday pay is calculated.
The minimum amount of holidays a full time employee is entitled to is 5.6 weeks a year including 8 bank holidays, so that is what the calculations below will be based upon.
For the first example assume that the employee has requested 4 days holiday, is working a 5 day week, earning £15,000.00 per year and able to take their holiday without accrual. The employee would not usually work bank holidays.
5.6 weeks entitlement x 5 working days a week = 28 days
28 days – 8 bank holiday days = 20 days
£15,000.00 annual salary / 52 weeks a year = £288.46 average weekly earnings
1 week / 5 working days a week = 0.2
0.2 x 4 days requested = 0.8
£288.46 x 0.8 = £230.77 holiday pay due
Obviously it is a good idea to keep track of the holiday days each employee takes so they don’t go over their allowance, so here is an example of an employee who has already taken some holiday days.
For this example assume that the employee has requested 6 days, is working a 4 day week, works irregular hours each week and is able to take holiday without accrual. The employee would be expected to work bank holidays and has already taken 18 days of their allowance this holiday year.
5.6 weeks entitlement x 4 working days a week = 22.4 days (do not minus bank holidays)
Last 12 weeks earnings added together / 12 = an average of £250.00 per week
22.4 days entitlement – 18 days already taken = 4.4 days remaining
1 week / 4 working days = 0.25
0.25 x 4.4 days remaining = 1.1
£250.00 x 1.1 = £275.00 holiday pay due
For employees who have to accrue holiday before taking it the pay is calculated in the same way as it would be for an employee who was leaving and needed the remainder of his/her holiday pay due. This is based on either the start of the holiday year or the start of employment, whichever is the later date.
For the next example assume that the employee is being made a leaver on 14 November 2014 after 3 years’ service. Their holiday year runs from 1st April to 31st March the following year, they worked a 5 day week, earned an average of £250.00 per week, have already taken 11 days holiday and would be expected to work bank holidays.
1st April – 14th November = 228 days employed this holiday year
5.6 weeks / 365 days a year x 228 days employed = 3.49 weeks entitlement this year
3.49 weeks entitlement x 5 working days a week = 17.45 days including bank holidays
17.45 days entitlement – 11 days already taken = 6.45 days remaining
6.45 days remaining / 5 working days a week = 1.29
£250.00 x 1.29 = £322.50 holiday pay due
Some employers will allow their employees to elect to buy extra holiday days, but there is a limit. This will usually be up to an extra week, in which case the employee’s weekly earnings are calculated and that will be the ‘price’ of the extra holiday days if the full week was requested. This ‘price’ will then be split over the year so if an employee was paid monthly he/she would pay 1/12th of the ‘price’ every month, if they were paid weekly it would be 1/52nd of the ‘price’ per week and so on.