How to calculate holiday pay entitlement
British law sets down a minimum number of days that a worker must be allowed to take off work each year but still receive payment. How this works will depend on the person's working schedule and how long they have worked. In most cases "holiday pay" is paid at the same time and in the same way as if the person had worked that week.
Multiply the number of days the person works each week by 5.6 to find the annual leave. For somebody working a normal five-day week this is 28 days. For somebody working part time, this will be a lower figure. The maximum amount that can be legally required is 28 days, even if the person works more than five days a week.
Allow the person to take up to this number of days as paid leave (holiday). You must negotiate which days he can take, with both sides required to act reasonably. You can insist that workers take some of their paid leave on bank holidays or other days when you close the workplace.
Pay the person as normal, at the normal daily rate of pay, for each day of paid leave. You must not adjust the normal payment schedule to take account of holiday time. For example, you cannot pay the person at a slightly higher rate for the weeks she works and then pay nothing for the weeks she is on holiday.
Calculate the holiday pay rate for shift workers by calculating the average number of hours the person worked each week over the past 12 weeks, then multiplying by the person's average hourly rate. The result is how much you must pay them for each week of holiday pay. Split this by five to work out the daily holiday pay amount if the person doesn't take a full week of paid leave at a time.
Calculate the person's annual holiday entitlement, then adjust in proportion to how much of the current leave year has elapsed. A leave year could be a calendar year, or another 12 month period, such as your financial year. For example, if the person is entitled to 28 paid leave days per calendar year and it is the end of June, the proportional entitlement is 14 days.
Subtract the number of days the person has taken as paid leave so far during the year from the proportional entitlement. The result is the remaining statutory annual leave.
Calculate the pay the employee would receive for the remaining statutory annual leave. The person can then choose whether to take this time as paid leave -- in other words, continuing to receive normal payment but finishing work before her official leaving date -- or to work until her official leaving date and receive the pay for the unused leave days as a lump sum. If you have dismissed somebody, even for gross misconduct, you can force them to stop working immediately but must still pay the relevant holiday pay for any remaining statutory annual leave.
When a worker starts a new job, his annual paid leave entitlement is adjusted in proportion to how much of the current leave year has elapsed. For example, if somebody starts a full time job on 1 April and you use the calendar year as your leave year, the person is entitled to three-quarters of the annual allowance. For a five day worker with a normal annual allowance of 28 days, the worker will therefore be entitled to 21 days between starting work on 1 April and the end of the holiday year on 31 December.